Boris blasts "deluded" EU deal to cap bankers’ bonuses
EU officials have struck a deal to limit bankers’ pay as part of a wider agreement on financial regulation, with London Mayor Boris Johnson attacking the move as “deluded”.
The rules, which could be brought in as early as next year, mean that no banker could earn a bonus larger than their annual salary. The bonus limit can be doubled with approval from shareholders.
“For the first time in the history of EU financial market regulation, we will cap bankers’ bonuses,” said Othmar Karas, the European Parliament’s chief negotiator, who helped hammer out the deal.
However, London Mayor Boris Johnson said: “People will wonder why we stay in the EU if it persists in such transparently self-defeating policies. Brussels cannot control the global market for banking talent. Brussels cannot set pay for bankers around the world.
“The most this measure can hope to achieve is a boost for Zurich and Singapore and New York at the expense of a struggling EU.
“This is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire.”
Dr Pete Hahn of Cass Business School said the move could have “unintended consequences” in damaging European economic growth:
“Prescriptive legislation in banking often results in unintended consequences. Since bonuses became part of the legal and regulatory agenda in 2009-10, many of the highly paid at global banks have seen their salaries triple, and this in a global downturn. What could we see if we have a couple of good years? Remuneration consultants must already be working on flexible salaries and fixed bonus pay plans. But seriously, much of banking and economics are cyclical and the basis of bonuses was to address cyclicality.
“Certainly, bonus payments lost that purpose and need to be reoriented. Yet, the current proposal appears aimed at ludicrously legislating the economic cycle and creating ever higher fixed salaries and perks for those leading the largest banks. Those worried about Europe’s growth might think about how high fixed pay packages with limited upside might influence senior bankers to increase risk taking or not.”