Banks on board … but is it a bonus?

The decidedly chillier onslaught of October brings with it the somewhat warmer news that, at last, five of the UK’s largest banks are setting the standard by agreeing to rein in excessive bonus payouts.

Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered have signed up to the proposals, following pressure from Chancellor Alistair Darling and suggested reforms at the G20 meeting in Pittsburgh.

The Financial Services Authority (FSA) has been keen on remuneration reforms for some time, but with five key banks on board, surely it’s only a matter of time before the others follow suit. I’m just not holding my breath that any of this will happen before Christmas.

Neither, it seems, are bankers, who are monumentally unconcerned that it will affect this year’s payouts, but who agreed that pay needed to come down. Opinion in the city is still divided as to whether these reforms will have any real impact.

Unsurprisingly, the Treasury is yet to persuade Goldman Sachs and JP Morgan to cap bonuses. And since the FSA’s planned code of practice for January 2010 is not compulsory, it could still be quite some time before we see a balanced and unified bonus culture on a national, let alone a global scale. The only logical way forward from here is compulsory legislation that holds all banks and other financial institutions to accountability.

It’s impossible to say whether or not financial stability really can be achieved through these measures. However, with the backing of the banks and cooperation from financial institutions at all levels, it’s one more step in the right direction … or at least it will be from 2010.

Don’t let any of this put you off pursuing a financial career; you’re still like to earn a healthy living, just without the wild compensation that was once available.