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March 1, 2013 / politicsbitesize

Capping the Bankers

BankersBonusesOver the past year much has been reported on the capping of those in receipt of benefits, but not much has been mentioned about the capping of bankers’ bonuses. However, all that changed on Wednesday evening when European Union officials announced that a provisional deal on the capping of bonuses had been reached.

The agreement was arrived at after eight hours of intensive talks in Brussels between members of the European parliament, the European Commission and representatives of the bloc’s 27 governments.  Under the new deal, instead of receiving multiple times their base salaries, the bonuses that bankers can be paid will be capped at only a year’s salary. Unsurprisingly, David Cameron was opposed to the cap and warned the EU that it should try to regulate the banks in other ways.

On hearing the news of the agreement the City of London suggested that the new rules would drive away talent.  Joe Rundle, head of trading at ETX Capital in London, told the BBC that the cap, ‘will drive up fixed salaries to compensate. Businesses that do not need to be inside the European Union will leave. And when banks invest in future divisions, it will be outside the EU.’  But the European Union seems set on reducing the likelihood of another financial collapse like the one we saw in 2007/8.

The EU has already taken a strong stance on the banking industry by implementing the long awaited Financial Transaction Tax (FTF) back in January this year.  But unlike the Robin Hood Tax, the proposed cap on bankers’ bonuses has been put into operation once before.

A quick Google search of ‘bankers’ bonus cap’ reveals that the issue was discussed and purportedly implemented a number of years ago.  In October 2010 the newspapers were filled with articles outlining the Committee of European Banking Supervisors’ (CEBS) tough new proposal on bankers’ bonuses.  A report issued by the Committee stated that bankers would not be allowed to receive more than 20% of their annual bonuses in cash.

An article in The Telegraph shed light on the fact that the UK’s Financial Services Authority adopted the CEBS guidelines and that they came into force on January 1st 2011.   Just as it has done in response to the latest proposals, the City voiced its concern at the time that talented young bankers would seek other countries within which to do business.  However, the evidence suggests that the outpouring of the young, rich and talented hasn’t occurred and that the threat was an empty one.

Perhaps a mass exodus by a clique of greedy and reckless bankers wouldn’t be a bad thing.  After all they are the ones who got us into this mess in the first place!  Mark Steel lays bare this point in his article for the Coalition of Resistance when he highlights the ‘screaming injustice’ that ‘one of the few professions that doesn’t have to cough up [to fix the problem] is the bankers themselves’.

Enough is enough and it is time for those who are partly responsible for the global financial crisis to shoulder the burden. So, if the bankers want to leave because the EU has implemented restrictions on the humongous bonuses that they were so used to getting then we have to let them go!  Good luck to them.

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