Oh, pity those poor bankers in Europe. Capping their bonuses? What’s next? Having to be honest?
In truth, this isn’t a bad step forward:
The European Union took a big step Thursday toward putting strict limits on the bonuses paid to bankers, hoping to discourage the risk-taking behavior that set off the financial crisis.
If the measure, opposed by the British government, becomes European law, the coveted bonuses that many bankers receive would be capped at no more than equal to their annual salaries, starting next year. Only if a bank’s shareholders approved could a bonus be higher — and even then it would be limited to no more than double the salary.
The move, part of a package of banking regulations known as Basel III that is aimed at reducing the danger of big bank failures, was hailed Thursday by some European lawmakers.
‘’We’ve achieved the most comprehensive banking reform in the European Union,’’ said Othmar Karas, an Austrian member of the European Parliament who helped find a compromise in a late-night negotiating session with representative from E.U. member states and the European Commission.
A main reasons behind the global financial crisis was bonuses, tied to the size of a banker’s portfolio, how much money he moved and brought into the bank — no matter if those deals, particularly of the subprime nature or the manipulation of interest rates, were dangerous for the economy. Capping bonuses will reduce a tad the greed factor.
This, though, is the indicator that not all will be well:
One senior executive based at a major European bank in Hong Kong, who declined to be identified by name because he was not authorized to speak to the news media, said a move to higher base salaries might have unintended consequences for employees, as it ‘’would make us less flexible and in the event of a downturn we could end up having to put more people out into the street.’
So, bankers base salaries will increase, uh huh. But, the funny thing is: in a downturn, laying off the top earners, who only earn huge piles of money because of the internal corruption scheme that encourages self-dealing, would be a good thing. Save the jobs of the regular workers and get rid of bloated executive level.