Investment banking bonuses. It’s a topic of perennial and rather lurid fascination. As bankers bask in the reflected glory of a decent H1 sector performance, reports of big hikes in annual bonuses have duly followed.

Investment banks – and banks generally – had a great run last year and year-to-date. But let’s be clear: that’s thanks to taxpayers. Governments the world over have done pretty much all of the heavy lifting around support schemes for businesses and individuals, using fiscal and monetary tools. Banks have been co-opted as support and transmission agents with limited risk.

While rock-bottom interest rates and a flat yield curve kept in place by emergency monetary policies have made it tough to make good money from bread-and-butter bank lending, remember that eurozone banks also have access to European Central Bank (ECB) money at negative rates – up to -1% – to keep the lending taps open. Let’s be clear what that means: the ECB is paying banks to lend. It’s not just that: pandemic monetary policy also led to a surge in central bank asset-purchase activities that fed a veritable capital markets frenzy in 2020 that is still going in 2021.

Soaring stock markets, a deluge of IPOs, SPAC fever (albeit much more an American phenomenon that didn’t really take off in Europe), a debt-raising binge, record M&A activity, and ‘good’ volatility that facilitated active trading have all benefited investment banking revenue profiles. Write-backs of precautionary provisioning by banking groups, as worst-case default and delinquency expectations failed to materialize, further super-charged bank profits.

As a result, as I mentioned at the top, bonus anticipation is in the air here in Europe; even more so in the US. A glance at compensation surveys suggest payout hikes of between 20% and 35% depending on the investment banking segment.

Banks must exercise restraint. The pandemic is nowhere near defeated. While economic recovery is underway, it will take some time for the difficulties experienced by so many to move into the past. Government support schemes are still in place in many countries in Europe and while delinquency rates from those coming off payment holidays are actually pretty positive to-date, it’s too early to declare victory.

The image of banks in the UK and across Europe has improved over the course of the pandemic. Banks should do everything in their power to keep the good press and not jeopardise it by improperly rewarding people for profits that were not generated in any way, shape or form by creativity or innovation on their part. No. Investment banks have made money as the original middle men piggybacking an attractive business environment not of their making. Thanks, and I repeat, to taxpayer-funded support to the corporate sector and to the financial markets

It’s not just that investment banks are seeing surging profits off the backs of ordinary people, I also read that they have been lobbying UK Chancellor of the Exchequer (Finance Minister) Rishi Sunak to remove the regulatory cap on bonuses in post-Brexit Britain. How predictable. Bonus caps are enshrined in the fifth iteration of the EU’s Capital Requirements Directive (CRD V) that Britain was committed to transposing into UK law as one of the final pre-Brexit acts. Bonuses are capped at 100% of salary as standard, or 200% with shareholder approval.

I have argued in the past against regulatory intervention in issues of remuneration in private companies, preferring the concept of old-fashioned guidance and appealing to banks’ claims of seeking good governance. But by pushing up salaries – massively so in many cases – in flagrant disregard of the spirit of the regulations, banks have shown themselves to be nothing but cynical. Don’t forget that the rules were put in place to force banks to craft sensible compensation frameworks to rein in unbridled risk-taking that posed systemic risk.

In post-Brexit Britain, regulators are in the process of figuring out which bits of EU rule-making they want to keep and which bits they want to ditch. But isn’t it just typical (and actually rather depressing) that the lobbying efforts of investment banks have turned to the thing it would appear they care about the most: making money for themselves.

Investment bank staff are already paid several multiples of what most people earn. Executive management and boards need to act responsibly. The icing on the cake for me? Trying to dress up this flagrant act of self-regard into some sort of altruistic effort to protect the fabric of London as a financial centre.

Low.