Abigail with attitude: Panic on the streets and trading desks of London
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Abigail with attitude: Panic on the streets and trading desks of London

Market histrionics and rioting hooligans are an indigestible combination. The August riots in London were an unwelcome back-drop to the bungee-jumping stock markets. I was intrigued by commentators’ attempts to link the two.

“There’s still a lot of rage against the banks,” one talking head expounded. “ That’s why today’s disaffected youth are on the rampage.” This is nonsense. The looters were greedy criminals who realised the police had lost control of the situation. We’re talking ‘yobbo summer’ rather than ‘Arab spring’.


The YouTube video of a Malaysian student mugged by thugs posing as good Samaritans has gone viral. Ashraf Haziq won a scholarship to study accountancy in London. While cycling to a friend’s house to break the Ramadan fast, he was attacked by rioters who stole his bicycle. As he lay bleeding, other youths helped him to his feet and then robbed him. The story contrasts Haziq’s quest for education and his religious values with the amorality of his attackers.

The bigger issue however is the gaping hole between the comfortable majority and a disenfranchised minority who are largely illiterate and have no hope of employment. As one commentator puts it: “ Whereas we go from school to university, they go from school to prison.” Cosseted bankers are deluded

The turmoil on international markets and the pressure that is being exerted for governments to cut spending can only lead to more social unrest in the developed economies. Meanwhile, markets abruptly came round to the Abigail with attitude viewpoint and saw that things were bad on many different fronts. The fact that Bank of America’s share price swooned 20% in one day in early August is eerily reminiscent of the dark days of 2008.

In April, my colleague Peter Lee wrote a great article called: ‘Banking isn’t working’. The thrust of his piece is that in an era of higher capital requirements and lower leverage, banks may not be able to earn a return on equity that is higher than their cost of capital.

One quote from an unnamed banker sums up the dilemma: “When [banks] are borrowing three-year money at 150 basis points over and lending it out for five years at 40bp over to corporates with similar credit ratings to their own, then banking has simply stopped making sense.”

Many senior bankers are deluded. They somehow believe that although the world has changed, their life has not. Perhaps this is because for those who kept their jobs and didn’t have too much invested in bank shares, the standard of living has remained the same: cosseted and gilded.

For years, I have wondered how long the hefty pay structure in investment banking can continue. Surely compensation compression looms?

I was one of the first journalists to point out that increasing base salaries in an attempt to lessen the pain of lower bonuses was foolhardy. I was also one of the first to highlight that this year would see banking lay-offs. Investment banking is an oligopoly.

There is no justification for compensation levels where 50% of revenues go to pay employees while investors receive negligible dividends. However, if the bosses squeeze the pay of the lower ranks, their own pay levels will be questioned. 

It’s a bit like a prison system where the inmates act as the wardens. 

Bank results are no tasty brew

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