George
Osborne has lost his campaign to stop the EU cap on bankers’ bonuses. An overwhelming majority of EU states backed a
1:1 ratio of salary-to-bonus, which shareholders can choose to raise to 2:1. This
falls well short of their expectations. There is still a one minute to
midnight opportunity of securing final concessions but the news has spooked the UK's anti-Europeans
and the pro-business lobby alike.
Othmar Karas the MEP from Austria (that well known financial centre) who spearheads
the negotiations for the EU parliament, said he saw no reason to “reopen the package”
because of “internal problems” in the UK! The government think the biggest setback for
the UK is failing to win exemptions for bankers outside the EU. This will have
important implications for banks such as HSBC, Barclays and Standard Chartered whose
bankers in New York or Singapore will be subject to the tighter rules. As so often the government are wrong on this, without this territoriality London based bankers, working for EU banks, would
all leave to ply their trade abroad - including the tens of thousands who work in London for non-British European Banks (Deutsche Bank, UBS, Credit Suisse, BNP Paribas, etc).
Sun setting on the City of London |
One partial reprieve for the
City could come in a potential delay to the implementation date until 2014. Anyway the
government have thrown in the towel its left to the bankers to contest this in
the courts as anti-competitive and a restraint of trade.
Interestingly the delay to 2014 would mean the pay restrictions would only apply after next year’s bonus season and this will leave a year before the UK’s referendum on EU membership. We could then have a perverse situation where our the country's hatred of the bankers may make a Euro-skeptic UK more incline to vote against an exit. We shall see. It's hard to imagine that someone in 10 Downing Street has worked this out, that would be giving our executive too much credit!
This is probably a storm in a tea cup as the US regulators should follow this lead and implement a similar cap and then all the smart mathematicians and 'teenage scribblers' will have to find something else to do - banking is becoming BORING again!
Interestingly the delay to 2014 would mean the pay restrictions would only apply after next year’s bonus season and this will leave a year before the UK’s referendum on EU membership. We could then have a perverse situation where our the country's hatred of the bankers may make a Euro-skeptic UK more incline to vote against an exit. We shall see. It's hard to imagine that someone in 10 Downing Street has worked this out, that would be giving our executive too much credit!
This is probably a storm in a tea cup as the US regulators should follow this lead and implement a similar cap and then all the smart mathematicians and 'teenage scribblers' will have to find something else to do - banking is becoming BORING again!
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