Margareta Pagano: The fat banker and his HK$1m bet

Publish and be damned: The Government should make public the FSA's report into the Royal Bank of Scotland collapse

Michael Geoghegan, the banker who lost a bitter fight for the top job at HSBC, is going on a diet when he leaves the bank at the end of the year.

Geoghegan hopes to lose 20kg – just over three stone – in 12 months. He's got every incentive to shed the weight as a close friend has bet him HK$1m – £80,000 – that he can't. Geoghegan is so sure he can drop the kilos with a punishing daily regime of running and swimming, he's taken up the wager. Not a bad bet, at £4,000/kg.

My good wishes go to him. However, the bet does make you wonder – once again – about the money these bankers have to spare, and the cavalier manner in which they are prepared to gamble it away.

Our politicians will soon be facing a similar gamble over what to do about this year's bankers' bonuses, but for them it could prove to be more life-threatening than a tough diet. As you read this, the world's biggest banks are working out how much to pay staff in bonuses. According to the Centre for Economics and Business Research, bankers have set aside a £7bn bonus pot which, although well down from the record £11.6bn paid in 2007, is still a nice chunk to be shared between the City's 315,000 workers. Behind the scenes, delicate and not so delicate negotiations are taking place between the Chancellor, George Osborne, and Business Secretary, Vince Cable, and the chairmen and chief executives of the UK's biggest banks. The politicians know they can't risk another outburst of anger towards the bankers, certainly not so soon after the protests over tuition fees and the growing frustration over cuts to public sector jobs and housing benefits.

Until now, Osborne and Cable have been hoping that a little arm-twisting would work; that urging restraint would make the bankers see sense and reduce the payments, to at least a more manageable £4bn.

But the bank chiefs I have spoken to, at the UK's biggest banks – HSBC, Royal Bank of Scotland and Barclays – say that while they would love to avoid a backlash and pay less, they dare not. They are petrified that if they don't pay the "market rate" their top producers will be poached by rivals, particularly those in the Far East where tax is lower and work is plentiful. Even the attempt by the banks to agree to implement Sir David Walker's recommendation a year ago to provide the details of all staff earnings over £1m was stymied by Barclays, because releasing such information would give away too much to competitors, they claimed.

So what are the politicians to do? I'm told the bonus issue is now back at the top of the agenda and being discussed regularly at meetings between the Prime Minister, the Deputy PM, Osborne and Cable, so keen are they to avoid another crisis. Cable is still the one pushing the hardest for another one-off bonus tax as the ultimate sanction if the bankers don't step into line. He knows that slapping on another tax is not the long-term answer but might work as a sticking plaster.

The pertinent issue is still the structure of banking, and the nature of the industry's incentive schemes which permit such huge pay awards. And that will not be tackled in a meaningful fashion before the Independent Commission on Banking reports next year. In the meantime, all the new regulations being introduced by the Financial Services Authority and the EU, clamping down on how much banks can pay in cash versus shares, and how long to hold them, are worthy but they are tinkering at the edge of the problem. The politicians know that if they are to come up with long-term solutions, it has to be done with international agreement at the G20 level, to avoid creating regulatory arbitrage between countries.

But there's one issue on which our politicians could earn themselves a little respect. They should force the FSA to publish its report into the catastrophic collapse of RBS, which cleared Sir Fred Goodwin and his directors of any wrongdoing despite the fact that the debacle cost the British taxpayer nearly £250bn in losses. The FSA defends its decision not to publish on the grounds that the report is overly technical, and not sufficiently complete, for public scrutiny. Seems strange, doesn't it, that the report was complete enough to exonerate Sir Fred, claiming that RBS's downfall was due to incompetence rather than fraud. In my book, if Sir Fred is found to be incompetent because he didn't understand the inherent risks of paying £59bn for ABN Amro, then surely he's negligent? RBS shareholders need to study this report to see if there is room for legal redress.

Hopefully, Cable will tell the FSA's chairman, Adair Turner, when he meets him this week to discuss the report, that the public must be given the chance to read why they coughed up so much money. If it isn't good enough to publish, then Cable should give Turner a deadline by which it should be polished up and made public. Another reason why the report should be out in the open is that we need to know why the FSA failed to spot what was happening at RBS during the summer of 2008. Many of the City's top analysts were warning that Sir Fred had overstretched himself, as did many RBS shareholders. Where was the City's watchdog then? Failing to publish only feeds the notion that it has something to hide.

As I have written many times before, the Government should hold an independent public inquiry into the collapse of both RBS and HBOS, and the emergency takeover by Lloyds Bank. Even though we may eventually make a profit on the bailout, taxpayers should be told why their money was used to keep the banking system afloat – and why taxes are still going up because of it. But don't bet on it.