HSBC bankers pocket huge pay rises this year

HSBC has garlanded its bankers with rises to basic pay totalling $153m (£95m) from the bank's $2bn bonus pool, it emerged yesterday.

The disclosure was made by the chairman, Douglas Flint, at a hearing of the Treasury Select Committee. Mr Flint said a decision on the size of the bonus pool for those working in its global banking & markets division had yet to be finalised, but he did give a rough estimate. "We have not yet determined how much it is going to be this year but it's around two billion," he said, without disclosing the currency, although he was likely to be referring to dollars. HSBC reports its profits in the US currency.

"We should remember that the bonus pot is there to incentivise people to deliver against the objectives they were set at the beginning of the year, not just about profit," he added.

Mr Flint refused to disclose how many HSBC bankers are paid more than £1m a year, but said he would have no objection to disclosing the figure if other banks do the same. The company disclosed that it paid three bankers more than £9m each in 2009. It is required to give these details under the listing rules that apply to companies on the Hong Kong Stock Exchange. Mr Flint also said most senior staff receive their bonuses in shares rather than cash, to encourage them not to take undue risks.

Mr Flint insisted that the bank "is not trying to leave London" at the hearing. But he said a three-yearly review of its location would be carried out this year. HSBC has been located in Britain since the takeover of the old Midland Bank by the Hong Kong & Shanghai Banking Corporation in 1992. However the bank has drawn an angry reaction for a perceived threat to quit if conditions are not to its liking as reforms are introduced to prevent a repeat of the financial crisis that devastated Britain's economy. While HSBC took no direct aid from the state, it benefited from a range of measures introduced by the Government and the Bank of England to shore up the financial system and prevent it from collapse. These included the central bank's Special Liquidity Scheme together with its introduction of a near zero interest rate policy.

Mr Flint, whose bank will benefit from cuts to corporation tax introduced by the Coalition Government, nonetheless rounded on the plans by George Osborne, the Chancellor, to introduce a £2.5bn banking levy. He described the charge as a tax on being headquartered in London.

He said: "London has historically, and continues to have, advantages." But Mr Flint still maintained that the location review would be held "on commercial grounds" and would consider "dispassionately" the pros and cons of its location in the capital.

Stuart Gulliver, the new chief executive, is by contrast to Mr Flint based in Hong Kong, but is still expected to spend a considerable amount of time in London and will pay tax as if he were a UK resident. A Hong Kong base for him is important to the bank, however, because it will enable him to remain close to the growing Asian markets.

Mr Flint said he expected a deal under the auspices of the so-called "Project Merlin" would be sealed "very soon". The deal is aimed at getting ministers to cease "banker bashing" in return for banks agreeing to lend to small businesses.