Bankers Bonuses

it something i dont really understand after hearing news about Northern Rock this morning

How does a bank who has lost many millions last year (again) pay out many millions in bonuses?

surely if you are making a loss there should be no bonuses?

or am i missing something

you are seeing the bank as just one entity.

If you as an individual were employed by them to hit big targets and you hit them (even if the rest of the bank did not) then you would expect to be paid your bonus. and you'd deserve it.

if you have a 1000 people working for you. £50k bonus on offer to hit massive targets. 900 loose money and fail. 100 hit or exceed their targets. You have your headline "Failing bank pays out £5M in bonuses"

Good analogy, Ross.

Also, worth saying that the really big bonuses tend not to be paid in domestic (branch) banking. These bonuses orginate in the International/ Wholesale/ Investment banking divisions.

I think Gareths point though is that the banks should be using that bonus money to repay us (their creditors and clients (well im not but...)) first as you know full well that if the roles were reversed and it was us that borrowed money from the bank, theyd insist we were repaying it on an agreed basis before we splashed out that money on a tropical holiday.

Now it may well be that they have set up a repayment scheme to the Government, and that the 'bail out money' is being repaid in instalments.

Whilst it wasnt all of the gamblers working in the banks gambling with money that isnt theirs that were responsible for the banks getting into the financial pickle they got into, the fact they worked for that bank/s means they should have to suffer the consequences of their choice, much the same as people who chose to work for Woolworths had to suffer compared to those who chose to work with Tesco.

Some of the public lost money with N Rock due to no fault of theirs and that should be repaid before any of the workers get any bonuses.
Quite why anybody still has their money with N Rock is beyond me.

Gareth

As the staff hit their targets they should have contributed to making a profit which has reduced the overall loss.

Bank staff are all heavily targeted.If it's not measured it's not done.The problem I've seen is the basis on which someone is paid the bonus.

If a bank employee is targeted to answer the phone quickly and resolve queries then that is easily measured.The bonus tends to supplement a low basic wage.

If a loan of say £1 million is granted in 2009 and that loan goes bad in 2011 and the Bank loses £100k can the bouns for selling that loan be clawed back?How do you police it this.What claw back period do you have?

Answer could be to pay in shares and your're not able to sell them for a period of say 3-5 years.But to make this work all banks would have to do it.There are plenty that are financially strong and with no government support-they won't do it

The majority of the losses were either in financial instruments that the bosses of the Banks didn't understand or loans on property,as they didn't forsee the fall in the market!!

The real villains are bankers most of us would never meet not the managers or staff in the local branches.

When a boat sinks - everyone has to swim.......... this is a case of the crew get the liferafts and the customers swim or drown.

My daughter runs a Nat West branch and her personal contributions have ensured that the branch has exceeded its target. Bonus-wise she'll get about £500 extra this year and has just been told that no matter what future salary may be her pension can only be based on a re-valued £15,800 (less than her current salary). This capping applies even if her final salary at retirement is a proportional £50,000.

She's already massivley pissed off about the pension, but remove the bonus and she'll leave.

There are four full-time employees at the branch and she writes the bank's target on her own. If she leaves then the branch would not contribute to the taxpayers' repayments.

Take away the incentives for bank staff (branch level) and no one will work the extra hours to get the bank out of the brown stuff.

Life is never as simple as a headline suggests.

If I owe you £1000 that's my problem.
If I owe you £10m that's your problem.

Has anyone heard of a new term doing the rounds - Bankster ?

Now I'm sorry but I have no sympathy with any employee of any bank struggling to defend their bonuses,and there is absolutely no excuse for any bonuses to be paid to anyone. Why? Simple.

After what happened in the financial crash caused by the bankers the only reason any employee has a job is because we the general public bailed them out at a cost estimated to be £25,000 per person, (but you could substitute any figure in there as it will be years before we ever find out).

Northern Rock employees are receiving bonuses for hitting targets to PAY US back. So let's stop and think about this. Your bank is about to go out of business so you are about to lose your job, at the last minute the government step in and save your job with loads of money from other people. Then the banks think it is right that the staff (who would have been out of a job if the money wasn't lent to them) can now recieve bonuses as a thank you (for working in the job they wouldn't have had) for being good enough to pay back the money they should never have been lent in the first place.

Whilst keeping all their pre banking collapse generous employment contracts, holidays, pay levels, benefits in kind, probably full pay maternity benefits, pension benefits etc.

On no level is this acceptable.

Now take the argument to the city whizz kids. They argue that they should have bonuses because otherwise the amazing talent would leave the banks. 'mmm talent....' is this the same talent that brought western capitalism to it's knees? Oh yes, so it is. So the people that are so stupid as to cause the problem are considered 12 months later to be so 'talented' that they need to share the billions of pounds of bonuses. Firstly why do they all have jobs? Because we bailed them out, (see above). Secondly why are they making so much money? Because we bailed them out and the quanititive easing (paid by us) put money on the banks balance sheets. Thirdly, even better there is now less competition after Lehmann brothers and others went out of business.

Lucky for some eh?

How many people still swimming??????????

So come on then. What's the alternative? alternative to bonuses that is.

Rememeber this isn't about bonuses for great work. The bonus is being paid because the banks have managed to pay back some of the money they were given to bail them out.

So, if the banking crisis hadn't have happened the taxpayer wouldn't have given the banks money and therefore there would (obviously) be no money to pay back.

They are effectively being rewarded for the banking collapse!

No collapse = no loan = no ability to get a bonus to pay back the loan they didn't need.

Banking collapse = loan = opportunity to get a bonus for paying back the loan.

Where else in business or life could this happen.

Wholesale and Investment Banks (I'm not sure about Retail Banks) have for ages applied a rule of "Total Compensation" or "Total Packages" in remuneration terms.

This means that for most (not all) individuals can trade some elements of their package dependent upon their individual needs at the time of choice (which usually happens annually), so for instance if the individual is 50, they may value contributions to their pension more highly than say, 10 days of their holiday entitlement and reduce their holiday entitlement accordingly for the benefit of their pension.

There is an advantage in this arrangement for the employer (and this comes to Ross' question above). For almost as long, Bankers have come to regard their bonus as part of their total compensation, so for instance, an individual may be employed on a total package of, say £200k. Of this £50k may be take home pay, £75k might be (discretionary) bonus and the rest might be periferal benefits (insurances, pension etc). (the figures may be out of kilter, I'm just higlighting the principle).

Somebody earlier in this thread mentioned converting bonus to shares, instead of paying cash. This is the headline solution as propogated by our beloved political leadership. The reality is that the Banks realised this and implemented this approach years ago, as a way of circumventing various tax constraints, and applied it to staff achieving bonuses above a specified level.

The individuals got around this by moving jobs regularly, getting their new employers to take on the obligation.

I don't think there is an alternative to bonuses, as the culture is embedded, but a difference in approach should become equally embedded within every organisation, which says that bonuses should be awarded on a risk adjusted basis, so in other words, if the individual takes on and commits to a highly profitable transaction (which usually means that the level of risk is high) then the level of that risk should be reflected in overall performance and bonus terms.

Boy, do you have lots to learn about life as a branch employee.

Employment contracts are a moveable feast, holidays are taken in order of seniority, pay levels are diabolical, benefits in kind (small mortgage subsidy) maternity benefits (yes, as the law decrees) and pension benefits curtailed and no longer final salary. My daughter runs the branch on a basic salary of £16,300.

Apart from that - spot on.