November 20, 2014 / 4:47 PM / 3 years ago

Despite furore, bankers' earnings keep climbing

* Senior London dealers’ packages up 12 percent this year

* Wages growing 10 times faster than inflation

By Jamie McGeever

LONDON, Nov 20 (Reuters) - At a time when scandal-hit bank traders are under fire from regulators, prosecutors and the public, there is no sign that the backlash is curbing their earning power.

The median annual compensation package for director-level employees on trading floors in London, such as senior and chief dealers, is growing at least 10 times faster than that of the average person, according to salary benchmarking site Emolument.

It now stands at 325,000 pounds ($510,000), comprising 175,000 pounds base salary and 150,000 pounds bonus, after rising 12 percent in the past year. On top of that, bonuses for the more successful traders can run into millions.

That annual increase is about 10 times the rate of UK inflation, and compares with the typical worker’s pay rise of barely 1 percent. The median annual salary in Britain is 27,000 pounds, rising to 32,150 in London.

The latest reminder of traders’ excesses came last week, when regulators fined six major banks a total of $4.3 billion for failing to stop dealers from trying to manipulate the foreign exchange market.

Transcripts from chatrooms frequented by traders under pseudonyms such as “The Three Musketeers” and “The Players” revealed a macho culture in which they used banter laced with obscenities as they colluded to rig exchange rates.


The debate over bankers’ bonuses took another turn on Thursday, when the European Union blocked Britain’s challenge to a bonus cap. Bankers, many based in the City of London, have tried to get round the cap by bumping up fixed salaries - a move the bloc’s banking watchdog has said is illegal.

Bank of England governor Mark Carney and others have said that bankers’ fixed salaries may also need regulating.

But many argue that as long as traders continue to make huge amounts of money for their employers and clients, their compensation packages and bonuses are actually fairly reasonable.

“Slashing huge bonuses will help, but won’t be the entire solution,” said Owen Watkins, a financial services lawyer at Lewis Silkin in London.

“The best way of reducing the possibility of this kind of thing happening is to recruit the right sort of people. Perhaps psychometric testing could help to weed out the unsuitable,” he said, adding that some traders try to game the system for the thrill as much as financial gain.

Fines on banks involved in forex manipulation and an earlier scandal over rigging of the Libor interest rate benchmark have so far cost them more than $10 billion. More penalties for FX are almost certain, and criminal prosecutions like those already under way over Libor are likely to follow too.

Researchers in Switzerland said in a study this week that a banking culture that implicitly puts financial gain above all else fuels greed and dishonesty and makes bankers more likely to cheat.

“Making as much money as possible is their raison d‘etre. It’s hard to see that changing,” said Kevin Dutton, research psychologist at Oxford University.

“It’s human nature. You can say trading is a ‘contact sport’, so the Libor and FX scandals are no real surprise.” (1 US dollar = 0.6360 British pound) (Reporting by Jamie McGeever; Editing by Mark Trevelyan)

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