Never mind that our banking system looks exactly the same as it did three years ago. The bankers want their bonuses, full stop. And the government is only too happy to let them have the money.


After all, George Osborne never meant what he said about being tough on banks.

Yesterday before the Treasury select committee, Barclays’ new boss Bob Diamond said, “There was a period of remorse and apology for banks, and I think that period needs to be over.” Sadly, he wasn’t joking. But he should have been.

Remorse? Over the past two years, there were a lot of words that came to mind when one thought of bankers, but this one certainly wasn’t among them.

But let’s assume that bankers are indeed deeply remorseful about the role they played in the financial crisis, that they can’t look at themselves in the mirror out of shame for having plunged the country into the worst recession in 80 years. Why would this period need to be over?

Because radical changes have happened, one would assume. Because the banking system has been thoroughly reformed. Because regulations have been put in place that prevent another crisis in the future. Because measures have been taken to ensure that the banks work for the people, and not the other way round.

Nothing has happened. The rather feeble Basel III rules, which require banks to hold more capital in order to absorb potential losses, are hardly a drastic instrument (the new rules must be implemented between 2013 and, er, 2019. No rush). Apart from that it’s business as usual.

“We need banks to be able to take risk,” Diamond said yesterday. In other words, the very culture that played such a crucial part in the financial crisis – the culture of excessive risk-taking – is to be encouraged again. And, rather unsurprisingly, bonuses should make a come-back as well. According to reports, banks could pay out up to £7 billion this year.

Bob DiamondIf Bob Diamond decides to take his bonus, he could pocket £8 million; the chief of state-controlled Royal Bank of Scotland, Stephen Hester, is expected to be paid a bonus of £2.5 million – together with his salary and other payments, he could take home as much as £6.8 million.

A shameful part in this story is played by the government. There was a time when both the Liberal Democrats and the Conservatives were talking tough – most of all Vince Cable, but also George Osborne. But that was a long time ago, when both wanted to be in government. Now that they are, it turns out that they didn’t really mean it (sound familiar?).

The bonus tax, which was introduced by Labour and raised £3.5 billion last year, has been replaced by a levy on bank balance sheets, which is expected to yield much less money. Yesterday Osborne said that he would introduce a new code of practice for the banks – it’s hard to think of a more inefficient and toothless measure to tackle City excesses.

In the same month that the regressive Value Added Tax (VAT) has been raised to 20%, at the beginning of the year that will see the brutal welfare and public sector cuts starting to bite (causing people on low incomes much hardship), high earners in the City want to reclaim the right to be paid millions of pounds.

The poorest people in the country lose financial support because the government says it cannot afford it, while the richest say they need millions in order for the banks to remain competitive. Does it really never occur to the likes of Bob Diamond that there might be something wrong with this system?

Peter Stauber

Peter Stäuber is a freelance journalist and translator. He writes for English and German language publications and is a member of the NUJ.