Erikka Askeland: 'Tough on the causes of unjustified bonuses'

Just don't mention remuneration. In Edinburgh this week, at a series of roadshows that are unusual for government commissions, Vickers tried to downplay the ICB's role in the vexed debate about how well bankers pay themselves.

But Irwin Stelzer, the economist and writer who joined Vickers on the panel as his foil, didn't let him get away with it. Stelzer, who argued that the ICB interim report needed to "be bolder", said that excluding the pay question reduces the tools it has available to reform the banks.

Vickers, who seems a little road weary (this was the second time the ICB has been to Edinburgh) was not going to let the cheeky American fluster him. He said the question was perhaps too tricky even for the ICB.

"We are a small team and we all have day jobs," said Vickers. "But to borrow a phrase, part of being tough on unjustified bonuses is being tough on the causes of unjustified bonuses."

Perhaps he should tell that the shareholders of HSBC. The bank yesterday recorded one of the biggest shareholder revolts yet, with almost 20 per cent voting against its remuneration report. The bank's new chief executive, Stuart Gulliver, is set to get a package worth up to 12.5m this year, which is peanuts compared with Bob Diamond over at Barclays, but still more than your average British salary maker - about 12.475m more.

But still, HSBC's plan was approved by 81 per cent of HSBC's owners, many of whom were more disgruntled about the bank's mediocre shareholder returns.

Who are these people thumbing their noses at the populace, who don't understand how a banker can be worth 500 times more than they are?

The people voting for the remuneration reports are the fund managers. And actually, Vickers, in his calm and subtle way, has them in his sights.

Part of his plan to be "tough on the causes of unjustified bonuses" is to look at mechanisms through which the banks' bond holders will also have to share the pain of a bank when it fails, along with the shareholders and the governments that have to go massively into debt in order to bail it out.

Vickers' initial proposals have been accused of being too soft because he has opted for "ringfencing" rather than splitting the "casino" banks from the high street banks - although he emphatically reserved the right not take the sword from out of his tool box.He has also called for a 10 per cent capital cushion, which is slightly higher than Basel III's ratio.

But the trick up his sleeve is the one aimed directly at the banks' bankers - bond holders - many of whom drink from the same water cooler as the fund managers who vote for the remuneration reports. These are the part of the bank's capital that are held as "co-cos" (contingent convertible notes) or "bail-in bonds", which Vickers says should be over and above, not just a part of, the 10 per cent capital buffer.

Of course the reason traditional bonds held as capital can be counted by the banks as if they are gold in a vault is that there is absolutely no way they won't get paid up. Which is the burden now faced by governments - the UK, Ireland, Greece and Portugal included - which, having taken the massive debts off the hands of the banks, now owe their creditors. Vickers added that it was "pretty amazing" that these investors will get back 100p in the pound they were promised. Even if it means shutting down schools and hospitals, or even taking down governments in order to pay up.

There is a growing mood that bond holders and fund managers should have known better than to believe that what banks were doing with their capital was realistic. And now, thanks to Vickers' loss-absorbent co-cos, they will have to pay more attention.

This might even mean that they will start paying attention to the bonus culture that led to the recklessness that brought UK lenders to their knees. In fact, the ICB is banking on it.