In the wake of proposals to cap London financial services bonuses, battered city banks may spark an exodus of top London fund management talent to higher paying positions in Shanghai, Mumbai and Dubai, the Guardianreported.

The British Government has warned it will be looking at ways to curb the bonuses of city banks, especially now in this weeks Us$86 billion bailout, many of them now have the Government as a de facto shareholder. However, over 4,000 city employees earned in excess of US$1.7million in the year to date, and attempts to curb this may lead to an exodus of city talent, warn bosses. Board directors pay appears in the public accounts and can easily be spotted. But other executives also earn high salaries – Barclays head of their Middle East operations, John Jenkins, is reported to have earned US$24million last year. Even “lowly paid” traders in the city expect six figure bonuses.

The financial services payment and bonus schemes certainly seem out of normal limits. Around 50 percent of bank revenues are paid out in salaries and bonuses. If Tesco, the UK version of Wal*Mart did the same, its 430,000 staff would each earn more than US$170,000 a year.

“If one bank holds down pay, then staff will leave and go to one that doesn’t,” said one fund manager. “And if London becomes badly paid then there will be an exodus to Mumbai, Shanghai or Dubai.” This year, City pay will be lower. Even before the crisis of recent weeks there were estimates predicting payouts would be slashed 40 percent this year, with up to half of bankers not qualifying for a bonus. According to the Centre for Economics and Business Research some 40,000 City workers are now set to lose their jobs, and bonuses will fall nearly 60 percent to 3.6billion pounds.

With banks in Asia largely immune from the worst of the global credit crunch, it remains to be seen whether or not such employees would in fact have the skills to work in Asia, or indeed if they will have a global fund management or deal making industry to work in. But for sure it seems likely that many, having already earned significant amounts in their city careers, may well gravitate to Asia – and not just as fund managers – to pursue a career in developing markets overseas.