Bank of England’s deputy governor Jon Cunliffe has warned that bankers are being paid too much and should expect a pay cut at a time when shareholders are losing out because of falling profits.
Speaking during a conference on the future of banking at Chatham House in London, Cunliffe said, "It is noticeable that since the crisis, for the industry as a whole, employees have received a larger share of a smaller pie relative to shareholders. And in the UK, due in no small part to one-off factors, this effect has been particularly pronounced.
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Cunliffe said that in the decade before the crisis started in 2007, profits attributable to shareholders averaged 60% of the pay bill at global banks and 75% at UK lenders. But by 2013, profits attributable to shareholders had fallen to around 25% of pay bills for large global banks.
It is important, he said, that in seeking to restore returns, "banks and investors do not think in terms of ‘back to the future’".
"With less leverage and more liquidity in banks, required returns ought generally to be lower than prior to the crisis," he added.
In case banks’ profits fail to recover, it will likely lead to pay cuts as regulators now refrain from allowing excessive risk-taking and leverage which was seen prior to the financial meltdown, Cunliffe said.
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By GlobalDataHe added that it would be "some time yet" before the public’s trust in banks, eroded during the financial crisis, was restored.
Cunliffe said "societal anger" had been the motivation for much of the reform of the sector in the six years since the bailouts.
