Only six weeks ago the City of London seemed headed for another round of hefty bonus payouts from a bumper first half of transactions. But a global financial downturn has dampened the mood. Bankers and traders who splurge on fast cars, vacation homes and luxury yachts with the extra cash each year may be forced to scale back their spending plans as the U.S. sub prime turmoil and credit squeeze have brought deal flow to a grinding halt. About 4,200 bankers in the City of London pocketed bonuses of more than 1 million pounds each in the latest bonus season. But payouts could tumble by as much as a quarter this time around. The forecast is a U-turn from the centre's earlier prediction that this year's City bonuses would top last year's record high pool of around 8.8 billion pounds, which itself was an increase of 18.3 percent on 2005. Since then, a sharp rise in defaults in the U.S. sub prime mortgage market -- which caters to borrowers with poor credit histories -- set off global market volatility and deeply dented revenues of some of the world's biggest banks. Investment banks and brokerages typically pay half their earnings to staff. The bonus season runs from December to March. Top dealmakers earn extra pay that can run to several multiples of annual salary, while traders can earn a percentage of profit they make for the bank. Not everyone need be pessimistic, however. Bankers and traders working in some areas, including emerging markets, prime brokerage and commodities and options, may still see a rise of up to 15 percent in payouts. A managing director can expect to make $2 million to $4 million (1 million to 2 million pounds) this year on average, and the salary will make up only about $150,000-$200,000 of that sum. One senior London-based banker said he was not expecting a dramatic fall in bonuses because of the strong first half, "I am reasonably relaxed about that from a European point of view," he said. "We all get paid too much anyway." reuters Captain Currency.