FT has analysed the share of bankers' pay in relation to profits at the top 13 international banks. One would have thought that, in this adverse environment, banks would respond by reducing rewards to bankers so that shareholders' returns are protected? But no! Bankers' rewards have increased while that of shareholders has fallen.
Here are facts in the FT story:
- staff costs accounted for more than 81 per cent of the total (of staff costs and net profits), compared with a pre-crisis tally of 58 per cent
- Dividends are came down to 4.5% of the pot compared to 15% earlier
- In the period under consideration, banks' share prices slumped nearly 60%
This is not a situation that can be remedied by market forces'. The fact that such distortions exist points to the absence of adequate competition and also to a failure of governance. Time for the regulators to step in and check pay excesses in banking.