Bankers and traders who splurge on fast cars, vacation homes and luxury yachts with the extra cash each year may be forced to scale back their spending plans as the U.S. subprime turmoil and credit squeeze have brought dealflow to a grinding halt, Reuters reports.
About 4,200 bankers in the City of London pocketed bonuses of more than 1 million pounds each in the latest bonus season, according to an estimate from the Centre for Economics and Business Research (CEBR).
But payouts could tumble by as much as a quarter this time around, said Jonathan Said, a senior economist at the centre. A sharp rise in defaults in the U.S. subprime mortgage market set off global market volatility and deeply dented revenues of some of the world’s biggest banks.
“Banks are having significant increases in their costs. They can’t access liquidity as cheaply as before,” says Said. “The first costs that you take off are bonuses.”
He said he expected a decline of 10 to 15 percent in payouts compared to last year but it could stretch to 25 percent.