Bankers are paid too much admits RBS chief


11:30 am - January 18th 2011

by Sunny Hundal    


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The chairman of Royal Bank of Scotland has conceded that bankers get paid too much, mostly because of what he calls a “gangmaster” culture in investment banking.

The comments were made to the BBC’s Robert Peston and will be broadcast tonight at 9pm on BBC 2.

Sir Philip Hampton says:

The star quality, as it were, seems to filter down to people who don’t seem so star quality. There is, if I can use the expression, a sort of gangmaster cultural phenomenon in this, that you recruit top people who really do make a difference, who really do move markets and get business and are really high achievers.

But they do tend to associate themselves with people who aren’t such stars, but they want them around and they trust them, sometimes they move with them and there is a team associated with it. And the disparities between the top stars in the team and some of the journeymen players, if you like, is probably not as marked as it should be.

Sir Hampton also says that the ballooning of salaries has not been accompanied by better results:

The most peculiar thing about it all, actually, if you look at the last ten years of massive increases in pay is that the performance for shareholders has been pretty disastrous really across most banks. Some of them have gone out of business altogether and most banks have had a relatively poor performance for shareholders.

RBS is expected to award just under £1bn of bonuses in total this year, down from around £1.3bn last year.

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Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


And the disparities between the top stars in the team and some of the journeymen players, if you like, is probably not as marked as it should be.

It may be that Hampton says elsewhere that bankers are paid too much. All that he says here, however, is that the gap between the real stars and the journeymen is not big enough. That could equally be interpreted as saying that the best bankers aren’t being paid enough.

That could equally be interpreted as saying that the best bankers aren’t being paid enough.

You know what I find especially helpful in interpreting things like this? Reading the original source (helpfully hyperlinked), which says “But it is “one of the major challenges” to reduce the pay of the more average bankers in the teams assembled by these stars.”

Now, given that it’s not a direct quote, I suppose it is theoretically possible that Peston is misrepresenting Sir Philip, but it’s not an assumption I’d leap towards myself.

There are those who still wonder how could it possibly be that bankers are “overpaid” in what they claim is a highly competitive market? Here are a few reasons with links to supporting reports:

– Mis-selling securities in markets with gullible potential clients where information asymmetries are rife:

“The Financial Services Authority has hit Barclays with a record 7.7 million pound fine for mis-selling two income investment products to more than 12,000 clients who lost money during the financial crisis.” [January 2011]
http://uk.reuters.com/article/idUKLNE70H03B20110118

– Insider dealing:

“The Financial Services Authority (FSA) today charged seven people with 13 charges in respect of conspiracy to deal on inside information obtained by the defendants from two major investment banks.” [March 2010]
http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/059.shtml

– Undisclosed conflicts of interest:

“Goldman Sachs apparently failed to declare a potential conflict of interest which resulted in pushing up the cost of a £23.5billion bail-out of Lloyds Banking Group, City sources claimed last night. The allegation that the Wall Street bank may have put its own interests ahead of its British clients comes just a week after it was accused of fraud in the US.” [April 2010]
http://www.dailymail.co.uk/news/article-1268378/Goldman-Sachs-conflict-inflated-Lloyds-bail-costs.html

“Bankers are paid too much etc” Cor blimey! Whatever are we going to hear next?

Bank robbers are forced to ignore Health and Safety warnings in the course of their work due to the avoidable workplace dangers caused by unsympathetic bankers?

And the Pope – why does he come across so High Churchy?


Reactions: Twitter, blogs
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