RBS chief Stephen Hester waivers bonus.

[andyh4]

[quote user="Russethouse"]I must be missing something, ?[/quote]

 

Sadly you are - actuarial statistics.  No matter how we would like our world to be prejudice free and equal opportunities for all, the end result is that in the US black and Hispanic people are:

More likely to have a poorly paid job

More likely to have limited skills

More likely to loose that job in a down turn

Less likely to have savings - linked to all of the above

and therefore more likely to default when the economy takes a dive.  Therefore they are a worse credit risk, but a credit risk that equality laws say cannot be taken into account.  Same issue as women drivers in Europe being less likely to have an accident.

 

Remember we are talking probabilities for a mass population and not about individuals.

 

I wish it were not like that, but it is.

[Russethouse]

 Yes, I know that, however the fact is these people as individuals were bad risks, did the US government say 'You have to lend to US black and Hispanic people no matter what their credit history is or risk factors are ? That seems a little stupid....

[Pommier]

I've got it Russethouse! On the mortgage application form there must be a question asking for the applicant's ethnic origins.

[Russethouse]

So - I get that bit, what I don't 'get' is why banks ever lent to people who were poor risks, whatever their colour, surely this wasn't the fault of the US government but the fault of bankers greed for more business, no matter the cost

[breizh]

There is some truth in this.

However, once you run out of good risk ethnic minority credit candidates, by default you must now stop lending to good risk majority population candidates, in order to maintain the proportationality. No more growth, stalled profits.

To shareholders this would not be acceptable. They would take their investment elsewhere. Share price falls, equity falls, potentially leading to insolvency.

Hence, lenders bent over backwards to reassess the high risk applicants.

 

Nothing exists in a vacuum. Nothing is ever as simple as it first appears.

[Pommier]

I was joking! Surely banks don't know or ask the colour or ethnic origin of applicants (do they???)

[Russethouse]

They know everything else [:D]

[andyh4]

[quote user="Pommier"]I was joking! Surely banks don't know or ask the colour or ethnic origin of applicants (do they???)[/quote]

 

If they are sitting across the room from you when you fill out the forms for them it is often fairly obvious.

[andyh4]

Actually, thinking about it further, since the banks will be required to make annual reports to the government regarding their equal handling of all groups they may well have to record ethnicity, sex etc for all their clients.

[brianagain]

[quote user="Chiefluvvie"

So well done British taxpayers and press - your envy and jealousy is pulling RBS back down just as it was becoming more secure/quote]

I guess everyone will now be pleased to see a 4.21% rise yesterday and a further 2.17% today.  The taxpayers investment has risen 2.39% this week so far.

Brian (again)

[Russethouse]

US Govn anti-discrimation policy which forced lenders to treat all ethnic groups equally. Thereby forcing them to lend to Hispanic/Afro-Americans equally as to Caucasians, even though these groups disproportionatly rest in lower income groups

I spoke to an American friend of mine this afternoon and this was the first she had heard of this policy - her take was that the crisis was caused by loans being bought and sold without the knowledge of the borrower and these arrangements were often to their detriment - she also pointed out that a large number of middle class Caucasians borrowers lost their homes.

Briezh, do you have a reference ?

[Benjamin]

I noticed on the TV news programme at the weekend that some sport was played; Rugby or something by men with funny shaped balls.

There was a logo on the telly: RBS it said in blue letters.

Why am I, as a UK taxpayer, paying to advertise a bank on a minority sports progreamme?

Break the contract. Walk away from the deal and save all us taxpayers some money.

[Quillan]

[quote user="Benjamin"]I noticed on the TV news programme at the weekend that some sport was played; Rugby or something by men with funny shaped balls.

There was a logo on the telly: RBS it said in blue letters.

Why am I, as a UK taxpayer, paying to advertise a bank on a minority sports progreamme?

Break the contract. Walk away from the deal and save all us taxpayers some money.

[/quote]

Ah yes but this year there are no bonus points for winning. [;-)]

[Benjamin]

Interesting Jon Snow interview on last night's Channel Four news with Stephen Hester.

It should be compulsory viewing for every DM reader.

http://www.channel4.com/news/catch-up/display/playlistref/230212/clipid/230212_INT_HESTER_23

[Quillan]

I watched that and thought it quite good. Trouble is Hester is really peeing in the wind or to put another way the meat in the sandwich, he gets it from both sides. I think if he knew before he took the job what he knows now he would not have taken it and the DM readers would really have something to complain about.

The only way out if this bonus culture is for all banks and financial institutions to sort this out and make the bonuses not just more realistic but longer term. Say you have a five year contract and you get the bonus, based on your five years work, at the end of the contract. The problem is that if they did that and one bank 'blinked' the whole thing would fall apart. The current culture amongst the banks means that to get the best people you have to be part of that culture whether you like it or not. I agree with performance linked bonuses and have paid them out myself, not for doing the job, because that's what your paid for but for going beyond the 'call of duty' as it were, doing something exceptional. I therefore don't agree with the current bonus system but I can understand why it is like it is.

[Gardian]

[quote user="Quillan"]The only way out if this bonus culture is for all banks and financial institutions to sort this out and make the bonuses not just more realistic but longer term. Say you have a five year contract and you get the bonus, based on your five years work, at the end of the contract. [/quote]

I follow your drift, but it would be tough on anybody to have to wait five years for an incentive payment.

Surely the answer is simple?  Bonus payments based on objective criteria rather than subjective ones?

For a CEO, it would be relatively straightforward: actual vs planned profitability + something like customer satisfaction rating.  The first element wouldn't disqualify a loss in any given financial year if the planned loss was an improvement over the previous year's and that loss was 'bettered'.

The organisations that are (justifiably) getting media and public flak have been guilty of (a) subjective awards ("we think that he's doing a good job") and (b) singularly failing to sell their rationale for these awards (probably because they couldn't).

 

[Quillan]

[quote user="Gardian"]

I follow your drift, but it would be tough on anybody to have to wait five years for an incentive payment.

[/quote]

Well no not really although I only gave five years as an example, it could be two or three years. If all the banks and financial institutions signed up to this then no it's not tough and if you don't like it there is nowhere else to go, sort of take it or leave it. You can get a bonus one year and the next year it could all goes tits up and as Hester says you need to be able to claw back any bonus but that's not easy and there is no legal precedence. Those that have given money back have done so voluntarily (probably with a few threats along the way). The idea of people getting their bonuses at the end of their contract is not new, ask most that have worked in the middle east. It keeps people focused and make them continue to perform all the way to the end of their contract.

[Benjamin]

[quote user="Gardian"]

The organisations that are (justifiably) getting media and public flak have been guilty of (a) subjective awards ("we think that he's doing a good job") and (b) singularly failing to sell their rationale for these awards (probably because they couldn't).

[/quote]

From what I hear I don't think there was anything subjective about the bonus payments at RBS and as for being unable to explain the rationale behind them, then Stephen Hester did that rather well.

Don't get me wrong, I'm no supporter of bankers' obscene bonuses, but in the case of Stephen Hester I feel a very good and decent man was hounded by the gutter press.