Is there a positive correlation between large bonuses and stupid clients?
Robert Pickering, the former chief executive of Cazenove, has come up with an interesting explanation for the real reason bankers earn large sums, and it has nothing to do with talented individuals or short term risk taking.
In a letter to the Financial Times last week, Pickering attributed payouts' enormity to clients' continued and curious willingness to pay high fees.
"The real marvel is that customers, both corporate and institutional, continue to be willing to pay so much for essentially commoditised services in a ferociously competitive marketplace served by multiple providers, thus generating these outsized profits."
Clients' willingness to pay for 'essentially commoditised services' may be diminishing, however.
The Guardian reports that fund managers, in combination with Lazard and Rothschild, are working on a system to cut banks out of rights issues worth less than 500m.
The move follows complaints about fees for rights issues, which have risen dramatically in the past 18 months as banks have sought to cover the risk that they'll be left with the securities they've underwritten.
In a long interview with the Financial Times today, Gordon Brown says there's a "legitimate issue" around the fees charged for M&A and equity underwriting, particularly as there are fewer large banks than there once were.
In the interview, Brown favours bonus clawbacks, but doesn't appear to support Turner's notion of a Tobin tax, caps on bonuses, or eschewing the defence of London as a financial centre.
