The Financial Services Authority’s lawyers are looking into the possibility of claiming exemption for the City from stringent new EU banking pay rules.
On Tuesday 6th July Members of the European Parliament voted by an overwhelming majority of 625 to 28 to impose the new rules. Under these regulations cash bonuses would be limited to 30% of the total amount (20% for the highest earners) with payment of the remainder being deferred for three years. Also, half of total remuneration will be in a form that can be ‘clawed back’ (contingent capital) should the bank subsequently run into financial trouble. The structure for the bosses of part nationalised banks has yet to be finalised.
Labour MEP Arlene McCarthy who pushed this through told the Telegraph "Two years on from the global financial crisis, these tough new rules on bonuses will transform the bonus culture and end incentives for excessive risk-taking. A high-risk and short-term bonus culture wrought havoc with the global economy and taxpayers paid the price. Since banks have failed to reform we are now doing the job for them."
But it seems that the FSA and the UK banking sector have other ideas.
Irving Henry the policy director for prudential capital and risk for the British Bankers Association told the Telegraph "Although the legislation will deliver a level playing field across Europe, there are parts that could introduce unnecessary complications. For instance, "contingent capital" has not yet defined or even thought through. And if state-owned banks have additional limits they will be at a competitive disadvantage to their peers. The FSA rules were clear but not rigid but these are muddling."
Normally when dealing with EU legislation the UK authorities make it even tighter by ‘gold plating’ it so as to ensure compliance. The TaxPayers Alliance has a piece on this procedure – www.taxpayersalliance.com/bettergovernment/2008/10/new-research-eu.html.
So it seems that while the ordinary UK mortal has to deal with fines for not following complicated EU driven bin diktats from local government, the big city bonus culture that nearly ruined us all will still be smiled upon.
Why do I get the feeling that we have systematically shut down the town’s industry and services just so that we can keep the local race track and betting shops open?
Let’s see how hard it really is to defeat EU legislation. Look at the kilo versus the pound fiasco with its associated costs and ‘metric martyrs’. If we end up ignoring or watering down the new EU bank pay rules to suit the big city boys then we should review all EU rules in the same way. That would be a true level playing field.