David Prosser: The Merlin magic exposed already

Outlook This bonus restraint seems to be spreading. Only 24 hours after George Osborne secured a pledge from British banks that bonuses would be lower this year, Credit Suisse yesterday said it was cutting its "variable compensation" – bonuses, that is – by 25 per cent.

Actually, the Credit Suisse announcement makes interesting reading in the context of the Project Merlin deal. The Swiss bank acknowledges the regulatory environment, but also makes it clear the bonus pool is lower for 2010 because so were revenues. Indeed, both Goldman Sachs and JP Morgan have in recent weeks lowered bonuses for the same reason.

Suddenly, the commitment to pay out less in bonuses from British banks looks a little less impressive. In most cases, payments to investment bankers will account for the biggest chunk of their bonus pools. And as investment banking was a less profitable activity last year, bonuses were always going to be lower.

The bonus pledge isn't the only disappointment in Project Merlin, of course. A net lending commitment would have more meaning than the gross lending promise secured. The additional disclosure rules would prompt greater transparency were they not to exclude the most highly-paid traders.

The Chancellor's desire to see an end to bank-bashing in the wake of the Merlin agreement isn't likely to be satisfied. The magic has already begun to wear off.