Margareta Pagano: The fat banker and his HK$1m bet

Publish and be damned: The Government should make public the FSA's report into the Royal Bank of Scotland collapse

Michael Geoghegan, the banker who lost a bitter fight for the top job at HSBC, is going on a diet when he leaves the bank at the end of the year.

Geoghegan hopes to lose 20kg – just over three stone – in 12 months. He's got every incentive to shed the weight as a close friend has bet him HK$1m – £80,000 – that he can't. Geoghegan is so sure he can drop the kilos with a punishing daily regime of running and swimming, he's taken up the wager. Not a bad bet, at £4,000/kg.

My good wishes go to him. However, the bet does make you wonder – once again – about the money these bankers have to spare, and the cavalier manner in which they are prepared to gamble it away.

Our politicians will soon be facing a similar gamble over what to do about this year's bankers' bonuses, but for them it could prove to be more life-threatening than a tough diet. As you read this, the world's biggest banks are working out how much to pay staff in bonuses. According to the Centre for Economics and Business Research, bankers have set aside a £7bn bonus pot which, although well down from the record £11.6bn paid in 2007, is still a nice chunk to be shared between the City's 315,000 workers. Behind the scenes, delicate and not so delicate negotiations are taking place between the Chancellor, George Osborne, and Business Secretary, Vince Cable, and the chairmen and chief executives of the UK's biggest banks. The politicians know they can't risk another outburst of anger towards the bankers, certainly not so soon after the protests over tuition fees and the growing frustration over cuts to public sector jobs and housing benefits.

Until now, Osborne and Cable have been hoping that a little arm-twisting would work; that urging restraint would make the bankers see sense and reduce the payments, to at least a more manageable £4bn.

But the bank chiefs I have spoken to, at the UK's biggest banks – HSBC, Royal Bank of Scotland and Barclays – say that while they would love to avoid a backlash and pay less, they dare not. They are petrified that if they don't pay the "market rate" their top producers will be poached by rivals, particularly those in the Far East where tax is lower and work is plentiful. Even the attempt by the banks to agree to implement Sir David Walker's recommendation a year ago to provide the details of all staff earnings over £1m was stymied by Barclays, because releasing such information would give away too much to competitors, they claimed.

So what are the politicians to do? I'm told the bonus issue is now back at the top of the agenda and being discussed regularly at meetings between the Prime Minister, the Deputy PM, Osborne and Cable, so keen are they to avoid another crisis. Cable is still the one pushing the hardest for another one-off bonus tax as the ultimate sanction if the bankers don't step into line. He knows that slapping on another tax is not the long-term answer but might work as a sticking plaster.

The pertinent issue is still the structure of banking, and the nature of the industry's incentive schemes which permit such huge pay awards. And that will not be tackled in a meaningful fashion before the Independent Commission on Banking reports next year. In the meantime, all the new regulations being introduced by the Financial Services Authority and the EU, clamping down on how much banks can pay in cash versus shares, and how long to hold them, are worthy but they are tinkering at the edge of the problem. The politicians know that if they are to come up with long-term solutions, it has to be done with international agreement at the G20 level, to avoid creating regulatory arbitrage between countries.

But there's one issue on which our politicians could earn themselves a little respect. They should force the FSA to publish its report into the catastrophic collapse of RBS, which cleared Sir Fred Goodwin and his directors of any wrongdoing despite the fact that the debacle cost the British taxpayer nearly £250bn in losses. The FSA defends its decision not to publish on the grounds that the report is overly technical, and not sufficiently complete, for public scrutiny. Seems strange, doesn't it, that the report was complete enough to exonerate Sir Fred, claiming that RBS's downfall was due to incompetence rather than fraud. In my book, if Sir Fred is found to be incompetent because he didn't understand the inherent risks of paying £59bn for ABN Amro, then surely he's negligent? RBS shareholders need to study this report to see if there is room for legal redress.

Hopefully, Cable will tell the FSA's chairman, Adair Turner, when he meets him this week to discuss the report, that the public must be given the chance to read why they coughed up so much money. If it isn't good enough to publish, then Cable should give Turner a deadline by which it should be polished up and made public. Another reason why the report should be out in the open is that we need to know why the FSA failed to spot what was happening at RBS during the summer of 2008. Many of the City's top analysts were warning that Sir Fred had overstretched himself, as did many RBS shareholders. Where was the City's watchdog then? Failing to publish only feeds the notion that it has something to hide.

As I have written many times before, the Government should hold an independent public inquiry into the collapse of both RBS and HBOS, and the emergency takeover by Lloyds Bank. Even though we may eventually make a profit on the bailout, taxpayers should be told why their money was used to keep the banking system afloat – and why taxes are still going up because of it. But don't bet on it.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there