KEY POINTS:
Last year, Citigroup paid US$34 billion ($42.41 billion) in salary and bonuses, almost 50 per cent more than in 2004.
Yet, over the same period, its net income plunged from US$17.1 billion to US$3.6 billion as it wrote off more than US$18 billion against its exposure to sub-prime mortgages.
It is not an isolated case: all the leading investment banks, on both sides of the Atlantic, have been generously rewarding their staff for devising and flogging ever more complicated debt securities.
It is now clear that these profits were illusory and shareholders are still counting the losses from drastic mispricing and poor risk analysis.
A growing number of bank executives, therefore, are rethinking their remuneration policies. Last week, the Institute of International Finance (IIF), a global association of banks, said it planned to draw up a code of conduct to stop bonus and incentive schemes that encouraged traders to take on excessive risk.
Regulators are also upping the pressure: Financial Services Authority chief executive Hector Sants has pointed to the "asymmetry" between shareholder losses and bonuses, while US Federal Reserve executives have been making similar noises.
Some bankers, though, say the bonus system is part of the culture, and any bank that tries to move away from it risks losing staff, and thus business, to rivals. *
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