Leading article: A modest blow to the bonus culture

There are three ways of looking at the announcement from HSBC that it intends to double the basic pay of its senior investment bankers. The first is the knee-jerk response that bankers are already vastly overpaid and that this is just the latest example of profligacy in a sector that has proved remarkably resistant both to pressure from public opinion and to government warnings.

The second is almost as negative, which is that it is just a way of minimising the effect on bankers' pay of restrictions to be finalised by the EU next month. These will defer the payment of most bonuses and limit the proportiion paid in cash. But the third way of looking at HSBC's announcement is as the first significant move against the unbridled bonus culture that undoubtedly contributed to the financial crisis. If higher basic salaries are designed to compensate senior bank staff for lower bonuses, this is progress – especially if their overall remuneration is thus reduced.

The prevalence of very high bonuses, which could form the bulk of a banker's pay, became a distorting factor on many levels. At the most basic level, the bonus was supposed to reward performance. Very often, though, bonuses were enshrined in bankers' terms of employment, which is why – so the banks complained – they were unable to change the practice overnight.

Bonuses that outstripped basic salary many times over had further undesirable effects. They made remuneration, inside a company and across the sector, notoriously untransparent. And where they were related to performance, it was to narrowly defined targets that arguably encouraged risky behaviour akin to gambling. Huge end-of-year bonuses also distorted the housing market in financial centres such as London. Far lower bonuses, genuinely tied to performance, would have less of a market-altering effect.

Where HSBC goes today, other banks are fully expected to go tomorrow, such appears to be the competition for staff. And while the banks, including those effectively in public ownership, could do far more to rein in pay, even these modest curbs on the bonus culture are a start.