Why do banks pay bonuses.

I really liked this comment from Asteve, who left it on one my recent blog posts. I think this is a deep insight into how banks really work.

Bonuses are not, in my opinion, about "retaining talent" (for that, it would be best to compete on salary.) I think bonuses are both a bribe and a threat to employees to keep quiet about anything they see that looks dodgy - since, otherwise they may lose personally.

It encourages employees to be complicit in any fraud they discover... and, what's more, by making the bonus culture pervasive within the industry, it encourages a even those with ethics to consider their colleagues before blowing the whistle.