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Record £13 billion in City bonuses

Telegraph.co.uk

Record £13 billion in City bonuses

BANKERS AND financiers have taken a record £12.6?billion in bonuses so far this year, despite the financial crisis.

Sunday Telegraph analysis of government figures shows how bonuses for City workers and other financial services professionals have continued to soar, exceeding previous records by more than £500?million.

The recent annual awards were mostly triggered by large profits made early in 2007, before the credit crunch hit, but will fuel a growing row over whether bankers are encouraged to take excessive risks with investors’ money. The £12.6?billion sum would almost match the £15?billion hole that has emerged in the accounts of British banks as much of their profitability proved temporary.

Mervyn King, the Bank of England Governor, has criticised the City’s bonus culture, saying that banks “designed compensation packages which provide incentives that are not in the long run in the interests of the bank themselves”. The figures will come as a shock to households, struggling with rising repossessions, mortgage costs and the growing likelihood of recession.

Roger Bootle, the managing director of Capital Economics, said: “These bankers are not being paid for their brilliance. They have effectively taken a large gamble and have been paid out handsomely when the gamble’s paid off. Now that it has gone so wrong, we are left to pick up the consequences.”

Meanwhile, anger mounts over the £3?million in pay, pensions and incentives given to Adam Crozier, the Royal Mail chief executive.

Unions called his pay “outrageous” at a time when post offices are closing, services are being cut and the organisation is making ever-bigger losses.

City commentators had expected financiers’ annual bonus tallies to fall this year. But calculations using the Office for National Statistics’ wage figures show that the financial sector made £12.6?billion in bonuses alone in the first three months. That is up by about four per cent on last year, when first-quarter payments totalled £12.1?billion. The figure for the same period in 2006 was £9.7?billion.

Most of the bonus money went to investment bankers and hedge fund managers. Dozens at Goldman Sachs each had £5?million bonuses over Christmas, with one trader taking more than £10?million. Bob Diamond, of Barclays, received £35?million, despite the bank writing off £2.2?billion in bad debts.

The billionaire investor George Soros said there would be recrimination. “There is a real problem with incentives for the banking and the hedge fund community.”

http://www.telegraph.co.uk/news/2022633/Record-and16313billion-in-City-bonuses.html

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