US bankers set for record pay and bonuses for second year

US bankers are set for record compensation for a second consecutive year, shattering both the illusion of pay-reform and the expectation that bank bonuses would be tempered while the US economy remains weak.

With third-quarter figures from JP Morgan expected to begin a bumper profit reporting season today, a study of more than three dozen banks, hedge funds, money-management and securities firms estimates they will pay $144bn (£90bn) in salary and benefits this year, a 4% increase on 2009.

The research, by the Wall Street Journal, found pay was rising faster than revenue, which gained 3% to $433bn, despite a slowdown in stock trading.

And while profits have fallen from their 2007 peak, the percentage directed to compensation has increased by 23%.

"Until the focus of these institutions changes from revenue generation to long-term shareholder value, we will see these outrageous pay packages and compensation levels," Charles Elson, director of the Weinberg Centre for Corporate Governance, told the WSJ.

Banks say their hands are tied, arguing that firms say that do not adequately compensate risk losing their top bankers. Political pressure and regulatory reform is no match for the market forces.

Where watchdogs were successful in altering the structure of compensation, they were not able to control its levels.

At Goldman Sachs, where revenue is projected to fall 13.5% this year to $39.1bn, compensation is expected to rise 3.7% to $16.8bn.

Still, compensation experts say regulation has successfully kept compensations "relatively flat" and pay may not rise in the near future as new rules come into effect governing capital requirements that will limit compensation pools.

Where revenue falls short, the study found, Wall Street firms will lay off employees in order to keep bonus pools high. UK-based Barclays Capital and Credit Suisse have cut some staff, while Morgan Stanley has a hiring freeze in place.

The report also found that bankers at closely regulated businesses are looking to join less closely monitored firms and hedge funds. At private equity firms Blackstone and Fortress Investment, compensation is projected to climb 12% and 29% respectively.