Bankers 'asking for 10 per cent rises to make up for lost bonuses'

BANKERS are seeking up to 10 per cent salary rises in the wake of the clampdown on bonuses, a City headhunter said today.

Pressure from the Government for a change in the bonus culture has already resulted in basic salaries being pushed up, said Shaun Springer, chief executive of Napier Scott.

He predicted that salaries could double in the next few years as the excessive bonuses of the Nineties are withdrawn. "We are looking at a much bigger emphasis on salary rather than commission in future," he said.

"Someone who was last year on a £100,000 salary and getting a £200,000 bonus will, perhaps, be paid a salary of £200,000 and get a £40,000 bonus."

Already, base salaries are rising by five to 10 per cent for senior bankers to compensate for the fall in bonuses that has been accelerated by public anger and political pressure.

The Government made bailed-out Royal Bank of Scotland curb cash bonuses this year and is putting pressure on Lloyds to pay out less.

Another big bail-out of the banks is expected to be launched this week if taxpayers become liable for £500 billion worth of bad loans and investments made by RBS and Lloyds Banking Group.

The two banks have deadlines this week to agree terms, as part of the Government's Asset Protection Scheme, under which taxpayers insure banks against future losses.

Ministers want the banks to begin lending again to families and companies in return for being freed from bad assets. But the deal will mean taxpayers being exposed even more - to a new total of £1.3 trillion.

Today's Financial Times said Chancellor Alistair Darling was also willing to drop a £480 million annual interest bill charged to Lloyds on taxpayer loans in exchange for a pledge by the bank to increase its lending by billions of pounds.

It would involve the Chancellor converting £4 billion of preference shares owned by the Government into non-voting equity, saving the bank from paying the coupon of 12 per cent. The Conservatives are floating plans to break up some of the biggest banks to create a more stable financial industry in the future.

Shadow chancellor George Osborne said it was "worth considering" whether banks should be split into separate investment and commercial arms, to prevent high street deposits being used for more risky ventures.

The plan opens a clear gap between the Conservatives and Labour because Gordon Brown has rejected similar ideas. Tory officials said Mr Osborne had not yet produced detailed proposals. At the same time, Tory leader David Cameron called for an inquiry into the banking crisis.

The narrow banks proposal is being worked on by the economic recovery committee, the group put together by Mr Cameron to mirror the Government's crisis-managament "war cabinet".

The big banks have argued that they will suffer an exodus of senior staff if they are forced to slash bonuses.

But Mr Springer, whose headhunting firm specialises in recruiting staff for banking posts in Europe, Africa and the Middle East, said there was no sign at present of the bailed-out banks losing people because of government pressure to cut bonuses.

"The opportunities for their staff to move elsewhere are few and far between," he said. "A year or two ago a senior banker could well have two or more opportunities to move but now they are finding it difficult. If they don't like what's on offer at their bank they are mainly having to swallow it.

"There are, however, some individuals who are very highly sought after and will always be in demand."

Mr Springer said cutting the importance of the bonus would force bankers to think more long-term when taking risks. "The idea is that it all becomes less commission oriented and that that will have an effect on bankers. They will be risking a £200,000 salary rather than a one-off payment of £200,000."

Bigger salaries will not entirely make up for the bonuses, however, because overall payment packages are likely to be lower.

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