EU nears cap on banker bonuses, as Osborne holds out

The UK is one of just three countries opposed to the cap.

EU banking reforms are set to impose a limit on bankers' pay, against the wishes of much of the City of London.

The proposal, backed by the democratically-elected European Parliament, would cap bonuses that exceed the recipients salary. France has recently come around to the idea, and, the Financial Times reports, there is now a "clear majority" which is willing to agree to the cap just to get the debate out of the way. The rest of the reforms, which are focused on bank capital ratios, are considered urgent, and there is little desire to hold them up over the pay caps.

The UK, leading those who oppose the pay caps, has suggested that even it is preparing to case on the basic idea, circulating a policy document suggesting reforms which "build on the principle of a cap", the paper reports:

It strengthens current rules enforced in the UK with an absolute ban on upfront cash bonuses that exceed salary and a requirement for bank shareholders to set a cap on variable to fixed pay.

But a ban on upfront cash bonuses is very different from the ban on the entire bonus exceeding salary. That proposed ban can, with a vote from a supermajority of shareholders, be weakened to a 2:1 ratio of bonus to salary, but even that is still a far more restrictive requirement than the one the UK desires.

The British government has reasons for its scepticism. The argument for including bonuses in a bill focused on bank stability is that, when a bonus can exceed the value of one's salary, the incentive to play it safe rather than go for massive short-term profits is reduced. But the UK also makes a compelling argument for focusing just on cash bonuses. Other types of bonus, like front-dated stock options or bonds which vest only if the employer still exists, can be tweaked so as to encourage not only profit but healthy, stable, profit.

In contrast, if the EU's current plan passes, the incentive will be to offer the entire value of the cap in up-front cash. The magnitude of the bonus may thus be shrunk, but its incentive effects could end up being perversely increased.

Nonetheless, politically the economic effects of the bonus cap are likely to be less important than the simple fact of its existence. The banking sector has been seen as overpaid by most of the British public for a very long time now, and if Osborne digs his heels in over what many will see as the right for banks to pay unlimited bonuses, he could find himself even more unpopular than he already is.

That is especially true if the importance of what is being delayed hits home. The capital ratios — which are the main focus of the talks — are widely seen as one of the first post-crisis regulations which could actually have a real effect on the likelihood and severity of future financial crises. By requiring banks to have a certain amount of liquid capital on hand, the move will, it is hoped, prevent the damaging bank runs which ultimately contributed to the recession in 2008. If the Chancellor is seen as holding the economy hostage over the right for banks to pay unlimited bonuses, his image as a canny political operative may be damaged somewhat.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Article 50 deadline: Nick Clegg urges Remainers to "defy Brexit bullies and speak up"

The former deputy Prime Minister argued Brexiteers were trying to silence the 48 per cent. 

On Wednesday 29 March, at 12.30pm, Britain's ambassador to the EU, Tim Barrow, will hand deliver a letter to the European Council President, Donald Tusk. On that sheet of paper will be the words triggering Article 50. Nine months after Britain voted for Brexit, it will formally begin the process of leaving the EU.

For grieving Remainers, the delivery of the letter abruptly marks the end of the denial stage. But what happens next?

Speaking at an Open Britain event, former Deputy Prime Minister and Lib Dem Leader Nick Clegg had an answer. Responding to the concerns of a scientist in the audience, he declared:

“The most important thing of all is people like you make your voice heard. What the hysterical aggression from the Brexiteers means is they want to silence you.

"That’s why they attack everyone. The Bank of England - how dare you speak about the British economy? How dare judges make a judgement? How dare Remainers still believe they want to be part of the EU? 

"What they systematically try to do is bully and delegitimise anyone who disagrees with their narrow world view.

"It’s a ludicrous thing when 16.1m people - that’s more than have ever voted for a party in a general election - voted for a different future, when 70 per cent of youngsters have voted for a different future.

"It is astonishing these people, how they give themselves the right to say: 'You have no voice, how dare you stick to your views how dare you stick to your dreams and aspirations?'

That’s the most important thing of all. You don’t get bored, you don’t get miserable, you don’t glum, you continue to speak up. What they hope is you’ll just go home, the most important thing is people continue to speak up."

He urged those affected by Brexit to lobby their MPs, and force them to raise the issue in Parliament. 

After Article 50 is triggered, the UK positioning is over, and the EU negotiators will set out their response. As well as the official negotiating team, MEPs and leaders of EU27 countries are likely to give their views - and with elections scheduled in France and Germany, some will be responding to the pressures of domestic politics first. 

For those Remainers who feel politically homeless, there are several groups that have sprung up to campaign against a hard Brexit:

Open Britain is in many ways the successor to the Remain campaign, with a cross-party group of MPs and a focus on retaining access to the single market and holding the government to account. 

Another Europe is Possible was the alternative, left-wing Remain campaign. It continues to organise protests and events.

March for Europe is a cross-Europe Facebook community which also organises events.

The People's Challenge was a crowd-funded campaign which, alongside the more famous Gina Miller, successfully challenged the government in court and forced it to give Parliament a vote on triggering Article 50.

The3million is a pressure group set up to represent EU citizens in the UK.

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.