EU bonus cap
The EU Parliament’s proposal to impose a 1:1 bonus:salary ratio for ‘bankers’ is not merely pointless. Ignoring great changes that banks have already made in aligning their pay with market conditions, it damages banks’ ability to adjust their cost structures to inevitable revenue fluctuations and sidelines stakeholders that are rightly tasked with making such decisions.
The bonus cap, as defined in the proposal, includes relatively junior staff, thus going far beyond the stated aim of discouraging ‘excessive’ risk-taking. The comparably constructive proposal by Cyprus was, in Nov-12, described as ‘totally unacceptable’.
We expect the result will be an increase in banks’ fixed costs and/or extended redundancies.