Cap to bankers salary Post Reply

[Mistletoe]

Hi
I am not very up on business news but I heard today that there is going to be a cap on bankers salary up to one times salary.

Doesn't that mean that many bankers will get a massive pay cut or am I being naiive?

[supergirl]

Not sure what it will involved exactly but it is pretty safe to say that there will be a lot of foreign banks who will be hiring english bankers if this us going through... Unless all the banks in the world (unrealistic) put a cap on the salary, it will just stop english banks hiring the best people and being competitive. (Like civil services, some services are actively looking for executive directors, they have received little applications (about 200) and then the ones chosen turn the job down because the terms are just crap.)
I believe you get what you pay for.

[Mistletoe]

so is this just EU banks?

So if there is a Brazillian bank in London it doesn't matter?

[supergirl]

I am not sure. Hopefully someone will enlighten us shortly.
It could be only EU banks or all banks that have offices in EU... I think it would seem to be common sense if it was at least the latter.
I was in a conversation last w-e about the position of London as a financial hub in the next 5 years.
It seems wise to say that this recession will change the face and the geopolitics of the western world as we knew it. Look at what is happening in the US at the moment having to sort out their budget before the automatic cuts come in action...

[BalhamMumWorkingFT]

I think that it will raise the salaries paid to bankers and change the culture of the bonus. However, I do think it is a bad idea and will impact the economy negatively for some time.

[Annabel (admin)]

Hi Guys
We went a bit off topic here, I've tidied it up!

[supergirl]

Annabel thanks

[Jen66]

The proposal (by the EU) is for banker's bonuses to be capped at no more than twice their salary.

But the UK government are opposed to this.

Personally I think it' a good idea. Most of the banks were bailed out by the public purse and reading about banker's six figure bonuses when people are struggling to pay their bills is not great for public morale.

[nvmof3]

The bigger the bonuses the better it is for the tax payers. 50% of the bonus goes directly into the tax payers' pocket as it is taxed at 50% through PAYE and a large proportion of the remaining 50% is ploughed back into the economy through the recipient's spending. Remember the top 1% of earners pay 27.7% of the annual tax income which covers the entire annual NHS budget and much more. So I see any measure to cut bonuses as completely crazy in these lean times. Also bear in mind that most of the big banks in London are not British so if they aren't paying their profits out to bankers working in this country they will just keep the money in their home country and we won't see a penny of it.
The way to kick start our economy is to inject more money into it by paying people more money, not by adopting the politics of envy.
And, by the way, I am not a banker.

[schoolgatesmum]

Completely agree with you about injecting more money into the economy but personally I'd rather the money was put back into the public sector and hundreds of thousands of jobs rather than the bonuses of a few thousand bankers.

[juliantenniscoach]

The last thing we need is more public sector jobs in an economy that can't afford to pay them. Gordon Brown's administration did their best to 'buy' their electorate and thankfully got found out.

Now you have to realistic and accept that London still is a major player in global finance. That brings huge benefits, yes huge downsides too but in the general scheme of things the plusses outweigh the minuses in a financial way. I'm unfortunately old enough to remember the huge 'brain drain' in the '70's, together with near 20% interest rates and inflation, power cuts and garbage piling up in the streets.

You think this recession is bad? Not anywhere near those dark days. And the Franco/German alliance in Brussels want to set our economic model for us? Sorry I didn't vote for them.

Be careful what you wish for.........................

[Tas]

This has been put forward by the EU and will need to be ratified first. Although the current government has stated it is against such a policy, if voted in then banks in the UK which are authorised by the FSA (Financial Services Authority) will need to implement the policy.

A couple of points:
1. It would only impact Banks. It will not impact hedge funds, private equity firms, nor private investment firms. Eventually it may encompass these firms but not for quite some time. From a 'bonus culture' perspective only a small percentage of employees in the banks actually receive the bonuses we read about in the media, yes others do receive bonuses but these can range from £100 to £40,000 and can be highly variable against the profits of the firm.
2. The biggest bonuses do tend to be in these 'other' firms.
3. From a company tax perspective and the employee NI payable on income, the City of London is the highest contributor to the government coffers.
4. Should this EU policy be introduced this will likely see a change in the way contracts are written. For example, base pay, associated benefits plus discretionary bonus (N.B. The FSA under their Remuneration Code requires companies to provide how they remunerate employees with a greater emphasis these days placed on compliance with regulation, rather than linked directely to profits made by the individual/team.....how much this actual occurs in practise is another question of course.) is the way at the moment. Looking forward base salaries are likely to increase but maybe the way benefits are linked to this may change e.g. life assurance is currently calculated on base salaries, but in the future may be calculated on a % of base salary. My point, albeit long winded, is that the actual amounts paid (salary + bonus) are unlikely to differ that much overall.

Overall, in my opinion, this is more a political/public "win" perception rather than something that is likely to really impact in any huge degree the current compensation culture, rather it is likely to change the structure!

[wasateacher]

The argument for paying bankers so much is that the very best are employed. If the very best have been employed then we are unwise to be putting so much emphasis on the banking sector. It has been the mistakes of the banking sector which has put us in the position we are in now.

Over the last 30/40 years the gap between the very rich and the median and modal salaries has increased hugely. I'm sorry but I don't think anyone earns a million pounds a year, let alone having bonuses when the mistakes you have made only catch up in a couple of years time when, presumably, you have moved on.

[schoolgatesmum]

How will the money go elsewhere if bonuses are capped? Not sure I quite understand.

[juliantenniscoach]

Because the bankers won't be there to be capped.