Bank bailout could have been dodged if bonuses 20 per cent lower
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The Bank of England said the Government bailout of the banks could have been avoided if bonuses and dividends had been reduced by as little as a fifth.
In its Financial Stability Report released today, the BoE said British banks could have saved up £75bn of capital between 2000 and 2008 by showing restraint on bonuses and dividends.
The BoE said that distributions in the future need to be “materially lower”.
It said: “If discretionary distributions had been 20 per cent lower per year between 2000 and 2008, banks would have generated around £75bn of additional capital - more than provided by the public sector during the crisis.”
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Readers' comments (7)
qed | 18 Dec 2009 1:50 pm
Banks have been taken hostage by reckless bankers and turned into private profiteering vehicles for the benefit of their employees.
Now banks attempt to do the same for entire economies.
This is an intolerable situation. Banks must be regulated more heavily, and if any of the robber barons leave the country in protest, all the better.
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Anonymous | 18 Dec 2009 2:04 pm
If if if ... if capital regulations had been tighter ... if risk had been better quantified ... if rating agencies were "better" ... if if if ...
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Irfan Faruki | 18 Dec 2009 2:22 pm
But that would mean that banks would have to behave responsibily... Forget that... Thats never gonna happen
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Dermot Brannigan | 18 Dec 2009 3:13 pm
What a ridiculous comment to make. "If banks hadn't paid so much in bonuses...."
Who's to say they wouldn't have spent it on something else? By paying so much in bonuses they were able to generate more capital and income and also pay the huge taxes that are levied on companies under this government. By paying SO much back into the system, BOE employees are able to be paid the vast salaries they are and their houses were worth the money they were. If only the BOE had understood more about the US banking system, it could've put more pressure on UK banks to take a more careful look about what the 'assets' they were buying
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ML | 18 Dec 2009 3:16 pm
I love these reports they are as one of the previous writers says "if if if." All that is actually needed is for each person to take responsibility for their decisions AND to take subsequent responsibility for the consequences of their decisions. now if everyone did that including the FSA, the Governement, MPS etc there would have been no banking crisis, no MPS expenses crisis, no massive government overspend etc etc
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Tom Wanh | 20 Dec 2009 10:02 am
Dermot Brannigan, your comments are silly. Banks got bailed out by the tune of billions, worldwide by trillions. Add to this the ongoing QE and artificially low interests fuelling carry-on trades. If you add all this together banks never had and never have paid the equivalent of taxes. Banks are at best capital destroyers, NOT creators!
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Anonymous | 6 Mar 2010 1:09 pm
Separate Casino banking from current account banking, so the government doesn't need to bail the banks out or...
If banks want to rely on a bailout (insurance policy) in the future, they should collectively pay the government a bailout insurance premium of around £7 billion a year. (which is only equivalent to 20% of the bonuses they pay each year. Peanuts to them).
Speaking of which, you don't hear much about how we, the public, are going to be repaid when RBS and the like pay back the government with interest in 5 or 6 years time.
We will undoubtedly have to pay higher taxes to replace 'our money' now, but and when the banks pay back this missing money plus interest, won't the government have been paid twice ?
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