Peston on bank bonuses

Ahead of tomorrow’s questioning of Royal Bank of Scotland Chief Executive, Stephen Hester, by the Treasury Select Committee, Robert Peston has a few choice questions of his own, to whit:

1. What proportion of investment banking profits can be put down as an exceptional windfall?

2. Given that bonuses are discretionary, on what basis have banks decided to pay record amounts to some executives?

3. Are investment banks as dependent on the skills of particular individuals as they think?

Have investment bankers in the world’s five ‘leading’ investment banks, reporting over the next two weeks, really earned $65bn in salary and bonuses for 2009 (a sum bigger than the economies of some EU member countries)?

(Oh, sorry – that was the rhetorical question.) As Nigel Stanley points out over on ToUChstone today, boardroom pay is now ‘well beyond the rational’. Given that the Chancellor’s temporary bank payroll tax is likely to realise – even at expanded levels – some £2bn (a sum which it would be useful to ring fence around a particular stated social use, by the way), the ease with which such a sum could be absorbed by corporate plc illustrates the need for further action on out-of-control pay. (Remembering that the purpose of the tax was to tackle the reward culture that pays out bonuses for excessive risk taking, a likely take some four times the original estimate of £550m (p. 117) has clearly some way to go to achieve its aim.) Even the FT is arguing for some regulation of [finance industry] bonuses where these are paid out by under-capitalised institutions (hat-tip: Tom). So, once again: a high pay commission, anyone?