European Union

E.U. Caps Bankers' Bonuses

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Credit:Reuters

The Council of the European Union has voted to cap bankers' bonuses, with only the U.K. voting against the proposal. The directive will limit bonuses to no more than twice bankers' salaries and go into effect in 2015. The measure comes in response to public anger over continuing financial crises and a desire on the part of E.U. officials to reduce risk in the financial sector.

Business leaders and commentators have criticized the cap and believe the result will be to drive up base pay and reduce flexibility over remuneration in times of crisis.

Christopher Mordue, partner at law firm Pinsent Masons, says: 

This European Union Council vote in favour of the bonus cap is no surprise and at least the banks have a clear timetable for reforming their bonus structures. The problem is that there are still some significant uncertainties about how the cap will work and who will be caught by it. Firms now face the difficult task of overhauling their remuneration practices in a short timescale without a clear picture of the final shape of the new rules.This is likely to result in broad brush compliance approaches, including increasing salary to mitigate the impact of the cap.

The removal of the ability of firms to reward their most successful workers will place E.U. financial centers at a competitive disadvantage when compared New York or Hong Kong. 

For some members of the European Parliament, the possibility of financiers relocating to these friendlier market centers is not a problem but a potential benefit.

From Bloomberg:

"If bankers and traders want to leave and go to other jurisdictions, it just shows that they do not have confidence in their own performance." Sharon Bowles, chairwoman of the [Economic and Monetary Affairs] committee, said in an e-mailed statement today."To those that would leave I say good riddance."

Because of the importance of financial services to the U.K. economy, British politicians have been the most vocal in their criticism of the move. London Mayor Boris Johnson has described the directive as "possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire."

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  1. “E.U. Caps Bankers’ Bonuses”

    No the E.U. does nothing of the sort. They “cap” a certain measure of something they call “bonuses”.
    And this works oh, so well! “Capping” pay, post WWII, got us employer-paid medical insurance and we all know how harmless that piece of Harry Truman crap was and still is, right hag Pelosi?

    1. Sevo, you are wise.

      1. Thanks.
        Damn written word in history books tells you things.

        1. “Books?”

          1. Geezers gonna geeze.

    2. We’re already a several levels into that. One main reason quite a few of these bankers even get such high bonuses is that the banks know that if the very risky bets backfire badly, the taxpayer will bail them out.

  2. Mayor Boris Johnson has described the directive as “possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire.”

    Things like this are why I have a soft spot for Boris even if he is good friends with, and claims to have great respect for, Bloomberg.

    1. With that comment, yea, I’ll give him a “get out of stupid shit for free” card.

      Just one, though.

  3. Hey, this is austerity everyone can enjoy. And it’s what the bankers get for giving the E.U. a say in compensation.

  4. Should be fun to see Nigel Farage make hay out of this.

    1. We’re only making plans for Nigel.

  5. Price controls lead to price patrols.

    1. Stealing that.

  6. Democracy in action.

    1. Sadly, no. The EU is not democratic in any sense — it’s an enormous distended bureaucracy where the citizens of member countries dont’ have input.

      An enormous bureaucracy with absolutely no accountability — it’s turning out splendidly, isn’t it?

      1. Sure, it’s accountable. People regularly pitch fits, and when the pols in Brussels ignore them they set fire to cars. What more feedback could you want?

  7. The measure comes in response to public anger over continuing financial crises and a desire on the part of E.U. officials to reduce risk in the financial sector.

    Meanwhile, the sources of those crises and risks – central banks and fractional reserve lending – remain untouched.

  8. There really is a lot of comedy to be mined here:
    “The problem is that there are still some significant uncertainties about how the cap will work and who will be caught by it.”

    Now think on that for a minute or so.
    The folks who are to be affected commonly make an annual income in at least 7 digits, and they do so by the arbitrage of values in the double-phone-number range.
    And the problem is ‘uncertainties’?! That’s what these people deal with every damn morning, and the E.U. twits think they can control that?
    Naah. The ‘problem’ is how is the E.U. next year gonna outlaw the work-around that’s established this year.

    1. It’s glorious, isn’t it? London is one of the two cities with the highest number of actuarial jobs. Not that I think it’s a good idea, but I trust my fellow professionals are more than up to the task of outsmarting some Soviet apparatchik wannabees.

      1. …”I trust my fellow professionals are more than up to the task of outsmarting some Soviet apparatchik wannabees.”

        If they aren’t, they deserve what they get.
        Unfortunately, the rest of us are going to have to live with the goddam, stupid results of this, just like we are now with Obozoscares.
        I don’t know where this distortion leads and right now, no one else does either, but every time a do-gooder third party sticks their nose in a transaction between two interested parties, harm is on its way.

  9. The EU population are a bunch of fucking pussy sheep. And the USA is not far behind. The only diff is that we are sheep pussies with guns, who are too worried about our kids weekend soccer matches and the next lame ass prime time TV show to worry about how badly our elected officials are fucking us over, and they are pushing it to new extremes each passing day.

    1. I don’t want more people paying attention; too many of those who already do invariably draw the wrong conclusions about how economies operate and what incentivizes their authorities. I doubt throwing the reality soap opera folks into the public forum with the self-selected bunch will improve odds for libertarians. Rather, I want the elected class so hobbled, castrated, and marginalized that people can safely enjoy their natural (frankly, normal) inclination against politics.

  10. “If bankers and traders want to leave and go to other jurisdictions, it just shows that they do not have confidence in their own performance.” Sharon Bowles, chairwoman of the [Economic and Monetary Affairs] committee, said in an e-mailed statement today.”To those that would leave I say good riddance.”

    ‘Juden’ is German for ‘bankers and traders’ isn’t it? How soon will ‘good riddance’ turn into ‘where do you think you’re going?’ do you suppose?

    1. I like how they always make it sound like a threat to the business owners and bankers.

      ‘You’re going to take your entrepreneurial spirit, education and wealth to another country and open a business there while people back here are sad, bankrupt and unemployed? Yeah, well sucks to be you.’

      1. Haven’t some EU states recently passed some pretty stiff exit taxes, though? They may be able to take their spirit and education, but they won’t be able to leave with their wealth.

        1. Haven’t some EU states recently passed some pretty stiff exit taxes, though?

          Even so, no one will ever move to the EU for this kind of business now. Part of the problem with stuff like this isn’t making people who are already there leave, it’s making it so no one moves there.

          1. Except for fertile Mooslims.

            1. Not ones with any business sense.

            2. fertile Muslims goes to EU for their generous welfare check.

          2. Exactly. Bureactras in finance should be first among those who understand how vastly the state apparatus relies on economic growth, not merely having occasional windfalls or keeping an orderly, if stagnant private sector. Welfarism needs year-over-year growth. It won’t survive without it, certainly not given the political penchant for expanding services and inventing new rights to be funded from the public till.

            Yet these same bureaucrats try to muscle out bankers because crass populism makes it politically expedient. Good luck with that.

    2. Sharon Bowles: You Fail Economics Forever.

  11. With these bonus caps in place, I can confidently say that that’s the last of these “financial crises”. And not a minute too soon.

  12. The directive will limit bonuses to no more than twice bankers’ salaries

    Damn. At least bankers can still collect tips and work side jobs.

  13. …place E.U. financial centers at a competitive disadvantage when compared New York or Hong Kong.

    You know who else…aw, screw it.

    1. “You know who else…aw, screw it.”
      Ed Snowden?

  14. So the top EU bankers will now have “company owned” Rolls Royces that only they can use (or more of them, anyway), and have “business lunches” in Monte Carlo twice a week, instead of paying for it “out of their own pockets”.

  15. At what point did Atlas Shrugged stop being a satire and become reality?

    1. Sometime around 2010.

      1. Sometime around 1933.

        1. Actually, we wouldn’t have to deal with a lot of this nonsense if we were still under the Articles of Confederation.

          1. Yeah but without a strong central government who would build the roads?

        2. Concur. 1933. It was inevitable from the second we were able to vote for free shit.

          The real question is…

          Is Rand’s ending to the story, the only possible conclusion or can mankind recognize the cause of its demize and stop it?

          I fear it’s the former.

          1. I don’t think it will stop, and the frontier is closed. Plus we don’t have the magic gizmo that hid the Gulch from the world.

            I am convinced that the next generation will be less free, and the one after that less free then the one before.

            Unless the tech singularity people are right. Then it could turn out ok.

            1. Yes, a singularity. Cold fusion or the like. In fact, the recent access to US oil and gas brought about by fracking, might have the power to grow us out of our mess, provided the pols let it happen and can stop making it worse with the spending.

              But a no shit libertarian revolution would also have the potential to fix it. When people begin to, no shit, suffer, will they have the wherewithal to see the correct path? I see small glimmers of potential out there, and I hope I’m not just deluding myself, but there may be a small chance. The increasing popularity of libertarian leaning politicians could be the spark to light the fire. It happened, against all odds, at the nation’s founding. Maybe lightning will strike twice.

              Not holding my breath, but it would be nice if I wasn’t looking at living the last third of my life in destitution.

              1. Or perhaps Rutan and the rest of the folks working on it might actually get us our High Frontier.

                I’d love to die on Mars. Or maybe we can get the Lunar Revolt going.

        3. Warren wins, Irish loses.

          Although I might go with 1865, but that will piss some people off.

  16. I urge these EU bureaucrats to pass rules regulating gravity (makes as much sense as trying to regulate economic laws), and then have a nice stroll off the top of their hideously designed European Contemporary high-rise.

    1. cavalier973| 6.21.13 @ 10:31PM |#
      “I urge these EU bureaucrats to pass rules regulating gravity…”

      I’d like to second this motion!
      It’ll give the EU twits the appearance of doing something; you know, the ‘intent’.
      And since it will have an actual effect of zero, the rest of us won’t have to live with the long-term results of their stupidity!
      Can we start a petition to have the EU and, (why not?) the US legi-twits spend the next ten years or so debating how gravity might be best regulated?
      Get those occupy assholes out there! Gravity harms the women, the poor and various races!

  17. CEO’s received median raises of 11% last year in an economic climate in which the median for most people is 3%. CEO pay is 1,800 times that of the average worker, and this all more or less happens because the market for executives is different than that of other employee populations.
    There are only so many private large cap companies and private equity firms out there, and very few executives would leave the labor market entirely simply because average pay across the market went down. If a “salary cap” on executive pay existed in the United States lower paydays would simply become the new normal.

    1. Guy Laguy| 6.21.13 @ 11:11PM |#
      …”If a “salary cap” on executive pay existed in the United States lower paydays would simply become the new normal.”

      Folks, put your hands together for GL! Isn’t he GREAT?! He’ll be here all week, tell your friends to join us!
      And don’t forget to tip your server well; they deserve it!
      Thank you all for coming!

    2. How about the truth. Government employees receive huge raises and bonuses on top of their already outsized wages, while private industry employees get 1%, or nothing, while the country bleeds to death from debt.

    3. Fuck off slaver.

    4. No, more companies and their execs would just leave the US and set up shop in more sensible countries.

  18. Want to see an example of what citizens need to do to get the attention of their government?

    See, Brazil. Nuff said. When we can put 2 million people in the streets, then we will see what happens. And no, it’s not about bus tickets. And it really doesn’t matter. Can the US put 2 million on the streets over being pissed off at gubmint? It’s way past time.

    1. What happened as a result of the bonus marches? Or the disarmament parades of 1982?

      Mostly what seems to happen in response is bad. Long, hot summer? Welfare state. Just because you got their att’n doesn’t mean they’ll respond the right way.

    2. Um, I think 1000 Timothy McVeighs would get more attention.

      1. Yeah, but the wrong kind…. we want to stop the NSA snooping and the Patriot Act spying and the drones, not give them more excuses for it.

  19. When I read the headline, my first thought was, “Good! Maybe now they’ll…d’oh!”

    For a second I’d forgotten banking exists as a private, voluntary service. It’s a mode of thought it’s easy to get into when you’re immersed in the language of “banksters”, etc.

    1. To be fair, it’s not really anymore.

  20. OT: wish I was clubbin’ in Calgary tonight. Heard the dance floors are gonna be flooded.

  21. Fucking unreal scene west of Calgary. Makes me look at my little creek and pond a little differently.

    1. Power outage in downtown Calgary

      1. Luckily, everyone has a horse, right?

  22. Noone ever warned the boy, RockNRoll is a vicious game.

  23. Smoetmiems man you jsut gotta roll that smack.

    http://www.Go-Anon.tk

  24. How about capping Lawyers’ pay as a response to public anger over continuing outrageous court awards and a desire on the part of officials to reduce the number of silly lawsuits? 😉

    1. How dare you sir!

      I was going to suggest capping the pay of EU regulators, and I would go further…cutting their pay when the next banking crisis occurs. After all, if they were doing their jobs, they would be preventing crises in the first place, wouldn’t they?

  25. Somewhere, Ayn Rand is rolling over in her grave…. What is this, the Anti-Dog-Eat-Dog Rule? Or the Australian version, Whack the Tall Poppy?

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