Bonuses create ‘mismatch’ between short and long-term goals.

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Pär Boman, chief executive of Sweden's Handelsbanken, is far from sure that bonuses are commercial rational. In an interview with the Financial Times he championed the case for fixed salaries.

"I do not believe you can combine long-term commitments with short-term incentives or you will have a mismatch," he told the newspaper. "That doesn't mean I'm against bonuses in principle but, in our company, we cannot see that they will help us develop the bank in the long term."

The comment came just the day after Sweden’s Financial Markets Minister Mats Odell said that Senior executives at Nordea – in which the state is the largest owner should give up their performance related bonuses.

"The government line is that companies with state ownership should change the compensation system and completely remove the variable compensation for management," Financial Markets Minister Mats Odell said. "This is also true of Nordea."

A debate -- with arguments wiggling from trust and moral in the banking system to retaining the best employees and keeping up with global competition -- has diverged Sweden’s largest banks in two rival camps.

Last month Swedbank, said it would cancel almost all of its 2009 bonuses. SEB said last week it would cut staff bonuses with two thirds. Nordea has refused to bend for the massive critic from the general public and government.

“The market for the skills required is global, with high salaries and a strong bonus element,” Hans Dalborg, Nordea’s chairman, and Christian Clausen, the chief executive of the bank, wrote in daily Dagens Nyheter.

Handelsbanken, the second-largest Nordic bank by market capitalisation, was sceptical of bonuses long before the financial crisis.

"It doesn't make sense to pay bonuses in good times and then in bad times tell [employees] they have to work harder for 30 per cent less money," Pär Boman told the FT.

Fourth-quarter earnings: Handelsbanken, Swedbank, SEB, Nordea