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Discuss this article (2 Comments)Mashreq boss condemns West's bonus schemes
by This email address is being protected from spam bots, you need Javascript enabled to view it on Thursday, 23 April 2009
BANKS SUFFER: Bonus schemes that reward growth causes banks to suffer, says Mashreq CEO.(ITP Images)
Mashreq CEO Abdul Aziz Al Ghurair has launched a scathing attack on banking executives in the West for pocketing hefty bonuses at a time of record losses in the industry.
US and European banks were to blame for their own financial woes after nurturing a culture of awarding bonuses to management based on short-term profits, said Ghurair , head of Mashreq, the biggest private bank in the UAE.
“It is not good,” he said in an interview with Arabian Business.
Related: Mashreq Capital plans sukuk fund
“A bonus is good as long as it doesn’t get out of control, but it should not provide an incentive to managers for short term gain but long term pain for the bank.”
“Sometimes rapid growth comes at a certain price.”
His comments follow controversy in the West surrounding senior staff collecting big bonuses while their struggling banks receive taxpayer-funded government bailouts.
The Royal Bank of Scotland (RBS), the crippled banking giant into which the UK government has pumped around $29.4bn, last year paid out $3.7bn in bonuses.
Executives at American International Group (AIG), which has received more than $180bn in tax payer bailout money in the US, were paid $165m in bonuses.
UBS, the European bank with the biggest writedowns and losses from the credit crunch, was ordered to slash bonuses after the Swiss government gave the country’s biggest bank a $59.2bn lifeline.
Losses in the banking industry across the US, Europe and Japan could reach $4 trillion from credit-related asset investments and lax lending, according to estimates from the International Monetary Fund this week.
“Unfortunately, most of these institutions run their banks from quarter to quarter and they want to keep the outside world happy by showing growth.
The bonuses are made on the growth, and the more you grow the bigger the bonus - that really has made banks suffer a lot,” said Ghurair.
Read the full interview in Arabian Business magazine, published on Sunday.
READERS' COMMENTS
Disclaimer: The views expressed here by our readers are not necessarily shared by ArabianBusiness.com or its employees.
SLAMMING WESTERN BANKS
Posted by Carmel, DUBAI, UAE on Sunday 26 April 2009 at 11:20 UAE time
Actually I would love to do a little more slamming when it comes to the banks who have become a law unto themselves. Once again we see how GREED has reared it's ugly head and those of are the hard working people who struggle with everyday living have to wipe up the vomit these people have poured out because the partying when on for far too long. I doubt very much the HANGOVER is being felt by those who orchestrated the party they just passed that on too.
Remember once upon a time how a bank came to be and that was all of those harding working people put money into a bank and saved their money. It's our money they started playing with because without it they would not have existed once upon a time.
They have had a great role to play in bringing the world to it's knees. I'll say it 100 times over SHAME SHAME SHAME.
Posted by Carmel, DUBAI, UAE on Sunday 26 April 2009 at 11:20 UAE time
Actually I would love to do a little more slamming when it comes to the banks who have become a law unto themselves. Once again we see how GREED has reared it's ugly head and those of are the hard working people who struggle with everyday living have to wipe up the vomit these people have poured out because the partying when on for far too long. I doubt very much the HANGOVER is being felt by those who orchestrated the party they just passed that on too.
Remember once upon a time how a bank came to be and that was all of those harding working people put money into a bank and saved their money. It's our money they started playing with because without it they would not have existed once upon a time.
They have had a great role to play in bringing the world to it's knees. I'll say it 100 times over SHAME SHAME SHAME.
Slamming western banks
Posted by Ralph Cook, Dubai, UAE on Friday 24 April 2009 at 10:21 UAE time
It shows just how rediculous this place can be. How can banks who gave huge credit limits to people on 2to 4k criticize Western banks. Some people have several credit cards with high limits. I have been offered 50,000 limit by such banks previously. Before the current crisis it was common for credit limits of 10000dhs to be given out without any checks. It took me three years of work in the UK to get that with a pristine credit record. Oh sorry credit rating, whats that?
While, the bonus paid to western banks may be unreasonable in the current economic situation, Middle East banks have much to learn about running banks. I would also suggest that certainly Dubai's who financial system has been based on assuming the boom would last for ever and funded construction projects that were beyond the realm of fantasy
Posted by Ralph Cook, Dubai, UAE on Friday 24 April 2009 at 10:21 UAE time
It shows just how rediculous this place can be. How can banks who gave huge credit limits to people on 2to 4k criticize Western banks. Some people have several credit cards with high limits. I have been offered 50,000 limit by such banks previously. Before the current crisis it was common for credit limits of 10000dhs to be given out without any checks. It took me three years of work in the UK to get that with a pristine credit record. Oh sorry credit rating, whats that?
While, the bonus paid to western banks may be unreasonable in the current economic situation, Middle East banks have much to learn about running banks. I would also suggest that certainly Dubai's who financial system has been based on assuming the boom would last for ever and funded construction projects that were beyond the realm of fantasy
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