BANK executives have waxed fat for years on a bonus culture fuelled by the headlong growth of a banking model now blown to smithereens.
For senior executives at the top of HBOS' corporate banking side, this is no minor temporary blip in their lavish lifestyles but a dramatic change that will be felt for years.
How big were these bonuses? At the top of this division sat Peter Cumm
ings. In 2007 his basic salary was £630,000. This was augmented by an "annual cash incentive" of £1.6 million and a further "biennial cash incentive" of £172,000. Other sundry items (but not including the pension pot and share options) took the grand total to £2.6 million.
Andy Hornby's total package was £1.9 million, of which some £700,000 comprised bonuses. All told, some 240 senior executives across the group would have benefited from significant bonus payments.
With the halting of bonuses in corporate banking, Edinburgh will now be feeling the same downdraught as London as these money taps have been turned off. Home improvements and associated household spending; private school fees; "gas guzzler" cars and accessories; upmarket travel, hotel and restaurant spending; financial and investment advisory; hospitality food and drink; electronic gadgetry, luxury gifts, art purchases – all these and more will feel the end of the bonus era – this year, next year and for many years ahead.
The greater pain, of course, has been suffered by hundreds of thousands of private investors through the 90 per cent collapse of the share prices of HBOS and rival RBS as the banking crisis has intensified. They have had to bear huge losses. While these were in the main "buy and hold" investors, the share collapse will have hugely damaged their confidence and their willingness to embark on major spending projects such as a home improvement or a new car. The investment nest-egg that underpinned their regular spending has been shattered.
The shockwaves will also be felt in due course by many pension fund investors. The recent plunge in interest rates, accompanied by falls in bank deposit account savings rates to near zero, adds insult to injury.
This is the silent loss of which few speak, but which will have a wider, more diffuse effect in the wealthier parts of Edinburgh and Scotland.
The passing of bonuses at HBOS corporate is a small part of a massive spending slump as the bank bubble has burst – and with it the excesses of an era.
