Banker Bonus Cap Scrapped

[Tom8]

Good inflationary headlines from the BBC

https://www.bbc.co.uk/news/business-67206997

Look forward to the frothing over this by people like Angela Rayner who have no idea what "bankers" do or indeed what they are.

[Rivenink]

The reason this was put into place... as I understood it (other than as a "we're punishing the bankers" populist move)... was as a industry wide measure to prevent "bankers" from taking too many short term risks in order to boost their next bonus.


Was this effective?

[chemistry]

Bigger bonuses = more tax paid = good thing

[Skeptisk]

chemistry said:

Bigger bonuses = more tax paid = good thing

Strange how that argument never seems to be wheeled out for people much further down the pay scale. When they ask for more (perhaps enough to live the same sort of life they did ten to fifteen years ago) they are usually told to suck it up or get better jobs. Why can’t the bankers retrain if they don’t like their pay and conditions?

[Hants PHer]

A sensible move, and one that's recommended by the regulators. Governments should not be telling private firms how to structure their employees' remuneration. They should, however, support vital industries that add to society's wealth. This measure will to a small degree, help to do that.

[speedyman]

Hants PHer said:

A sensible move, and one that's recommended by the regulators. Governments should not be telling private firms how to structure their employees' remuneration. They should, however, support vital industries that add to society's wealth. This measure will to a small degree, help to do that.

Nor should they be bailed out due to excessive risk taking when the s*&t hits the fan by the taxpayer. That was the reason bonuses were kerbed in the first place.

[Rivenink]

Hants PHer said:

A sensible move, and one that's recommended by the regulators. Governments should not be telling private firms how to structure their employees' remuneration. They should, however, support vital industries that add to society's wealth. This measure will to a small degree, help to do that.

Government has a responsibility to ensure stability, and should implement by whatever means, effective measures to ensure that preventable crises are prevented.

If that means telling private firms how they have to structure renumeration, so be it.

Short-term profit hunting led to excessively risky (and sometimes illegal) practices by financial institutions. How effective has limiting bonuses been in reducing that?

[TTwiggy]

I'm reminded of a joke:

'I saw a homeless person in the high street yesterday, so I immediately went to the cash point and withdrew £20. I then drove to the most expensive road in town and posted the £20 through the letterbox of the biggest house on that road, because I know the trickle-down effect will mean that £20 will soon get to the homeless person.'

[bmwmike]

speedyman said:

Hants PHer said:

A sensible move, and one that's recommended by the regulators. Governments should not be telling private firms how to structure their employees' remuneration. They should, however, support vital industries that add to society's wealth. This measure will to a small degree, help to do that.

Nor should they be bailed out due to excessive risk taking when the s*&t hits the fan by the taxpayer. That was the reason bonuses were kerbed in the first place.

Exactly. Odd how people forget that.

[Hants PHer]

Rivenink said:

Government has a responsibility to ensure stability, and should implement by whatever means, effective measures to ensure that preventable crises are prevented.

If that means telling private firms how they have to structure renumeration, so be it.

Short-term profit hunting led to excessively risky (and sometimes illegal) practices by financial institutions. How effective has limiting bonuses been in reducing that?

I certainly agree that controls should be in place over strategically important industries, since excessive risk taking is, by definition, undesirable. I disagree that an arbitrary ratio of fixed salary to bonus has much to do with that, especially when it comes from Brussels.

[isaldiri]

speedyman said:

Hants PHer said:

A sensible move, and one that's recommended by the regulators. Governments should not be telling private firms how to structure their employees' remuneration. They should, however, support vital industries that add to society's wealth. This measure will to a small degree, help to do that.

Nor should they be bailed out due to excessive risk taking when the s*&t hits the fan by the taxpayer. That was the reason bonuses were kerbed in the first place.

Apart from the small issue that banker total compensation actually didn't change overmuch and the bonus cap meant they were getting a much higher % of upfront cash from salary so many senior bankers ended up pretty bloody pleased with the end result after all the workarounds and (huge) increases in base salary........ It was an utterly useless move that was simply done for good political optics.

[ATG]

Rivenink said:

Hants PHer said:

A sensible move, and one that's recommended by the regulators. Governments should not be telling private firms how to structure their employees' remuneration. They should, however, support vital industries that add to society's wealth. This measure will to a small degree, help to do that.

Government has a responsibility to ensure stability, and should implement by whatever means, effective measures to ensure that preventable crises are prevented.

If that means telling private firms how they have to structure renumeration, so be it.

Short-term profit hunting led to excessively risky (and sometimes illegal) practices by financial institutions. How effective has limiting bonuses been in reducing that?

It's not an effective way of limiting a bank's risk. You do that by having a regulatory framework that requires banks to set aside large reserves of capital as a buffer against the financial risk they choose to run. Run more risk, you need to set aside more capital. You can also simply tell them that their capital markets operations are not allowed to speculate on behalf of the bank. You then have to justify your trading activity by demonstrating that it was conducted in order to fulfill customers' orders.

[speedyman]

isaldiri said:

speedyman said:

Hants PHer said:

A sensible move, and one that's recommended by the regulators. Governments should not be telling private firms how to structure their employees' remuneration. They should, however, support vital industries that add to society's wealth. This measure will to a small degree, help to do that.

Nor should they be bailed out due to excessive risk taking when the s*&t hits the fan by the taxpayer. That was the reason bonuses were kerbed in the first place.

Apart from the small issue that banker total compensation actually didn't change overmuch and the bonus cap meant they were getting a much higher % of upfront cash from salary so many senior bankers ended up pretty bloody pleased with the end result after all the workarounds and (huge) increases in base salary........ It was an utterly useless move that was simply done for good political optics.

Really, individuals like Nick Leeson and Fred Goodwin along with many banks showed how much risk taking was going on when the banking industry crashed. So why was the risk taking going on, simple answer is bonuses.

[valiant]

I guess we’re no longer worried about ‘inflationary pressures’…

[isaldiri]

speedyman said:

isaldiri said:

speedyman said:

Hants PHer said:

A sensible move, and one that's recommended by the regulators. Governments should not be telling private firms how to structure their employees' remuneration. They should, however, support vital industries that add to society's wealth. This measure will to a small degree, help to do that.

Nor should they be bailed out due to excessive risk taking when the s*&t hits the fan by the taxpayer. That was the reason bonuses were kerbed in the first place.

Apart from the small issue that banker total compensation actually didn't change overmuch and the bonus cap meant they were getting a much higher % of upfront cash from salary so many senior bankers ended up pretty bloody pleased with the end result after all the workarounds and (huge) increases in base salary........ It was an utterly useless move that was simply done for good political optics.

Really, individuals like Nick Leeson and Fred Goodwin along with many banks showed how much risk taking was going on when the banking industry crashed. So why was the risk taking going on, simple answer is bonuses.

I'm merely telling you what actually happened post bonus cap in the industry - it did not affect total compensation overmuch because base salaries were massively increased to compensate in order to keep to the cap.

[Hants PHer]

speedyman said:

Really, individuals like Nick Leeson and Fred Goodwin along with many banks showed how much risk taking was going on when the banking industry crashed. So why was the risk taking going on, simple answer is bonuses.

But Leeson's activities were a failure of internal regulation, among other things. You seem to be conflating regulation, which applied sensibly is a good thing, with arbitrary remuneration ratios which are simply pointless. They're two very different things.

What we want is a degree of risk taking, rewarded as the employer sees fit, but with appropriate regulatory safeguards. Your posts, I'm afraid, simply appear to be of the 'grrrr bankers' type.

[Car bon]

isaldiri said:

I'm merely telling you what actually happened post bonus cap in the industry - it did not affect total compensation overmuch because base salaries were massively increased to compensate in order to keep to the cap.

Agree - if anything it was an own goal as all it did was increased the fixed element (base salary) and reduce the variable element (bonus). So poor performance was 'punished' less etc.

[PositronicRay]

Tom8 said:

Good inflationary headlines from the BBC

https://www.bbc.co.uk/news/business-67206997

Look forward to the frothing over this by people like Angela Rayner who have no idea what "bankers" do or indeed what they are.

Does anyone? (Including most bankers)

[speedyman]

Hants PHer said:

speedyman said:

Really, individuals like Nick Leeson and Fred Goodwin along with many banks showed how much risk taking was going on when the banking industry crashed. So why was the risk taking going on, simple answer is bonuses.

But Leeson's activities were a failure of internal regulation, among other things. You seem to be conflating regulation, which applied sensibly is a good thing, with arbitrary remuneration ratios which are simply pointless. They're two very different things.

What we want is a degree of risk taking, rewarded as the employer sees fit, but with appropriate regulatory safeguards. Your posts, I'm afraid, simply appear to be of the 'grrrr bankers' type.

There were no appropriate safeguards before the crash or in Barings or RBS. So it should be grrrr bankers when the taxpayer is paying for their "mistakes".

[CraigyMc]

chemistry said:

Bigger bonuses = more tax paid = good thing

Depends a lot on the form of the bonuses, doesn't it?