Why are bankers bonus’s so immoral? – Personal Analysis

The banks are dictating the way in which the financial and economic structures of the world operate financially supported by government, but expect to be compensated as if they were operating in free and competitive markets. Retail bankers operate as oligopolies, but are essentially performing a public service, which should be regarded as important to the security of the country as the military. It is too easy to use cheap Government credit and lend out sparingly at huge mark ups (or even lend back to the Government itself with a mark up) when people have nowhere else to go.

During the last two decades, banks lent imprudently creating economic bubbles, and were able to ratchet up their profitability and bonus’s. Furthermore they found ways to repackage debt into various instruments to further enhance their profits and bonus’s. We know today that much of this lending was suspect at best and reckless at worst yet bonus’s were due. The financial markets collapsed in 2007/2008. If banks wish to be treated as operating in free and competitive manner, then they do not deserve to be completely bailed out by governments. They were bailed out. Without the bail out to the banking industry, no single bank in the world would have survived the contagion effect and chaos would have reigned.

The financial collapse ensured that the economies of the majority of the world collapsed as banks withdrew their support for their economies and in particular withdrew lending from those countries which had the worst problems and from economies that were unlikely to have significant growth and focused upon developing lending in emerging economies.

Today, many SME businesses in the UK are both going under and cannot obtain the necessary credit to support their growth. This has caused a severe credit crunch which further allows the banks to “manage” the market by borrowing at extremely low interest rates, whilst charging their borrowing customers extremely high rates, claiming that they need to rebuild their balance sheets (whose fault was that) and that their talented personnel deserve significant bonus’s for achieving mega profits.

Furthermore, within investment banking their business model is not aligned to the needs of the customer. They simply charge their customer a fixed fee on funds invested and in some cases a bonus for stellar performance ensuring that they gain their income whether they perform well or not. By the entire industry following the same principle, customers cannot find alternatives. Through this magical structuring of their business model, they are able to “guarantee” profitability and significant bonus’s.

However, bankers do deserve their bonus’s providing they are able to satisfy the following KPI’s.
a) Provide a safe and reliable institution for customers to maintain their cash deposits.
b) Provide financial support so that the economies are able to develop in a prudent manner.
c) Provide aligned, valuable and reliable customer service to their myriad of customers.

I am sorry to say, that bankers have not delivered, they are not especially talented over and above the rest of society and do not deserve mega bonus’s. Finally, it has been proven, that the payment of bonus’s for professional work, the type that bankers undertake does not provide the motivation claimed (http://comment.rsablogs.org.uk/2010/04/08/rsa-animate-drive/)

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