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March 1, 2013 6:35 pm
Philippe Lamberts is the City of London’s dreaded bonus snatcher. While countless politicians have decried outsized banker pay, few imagined a freshman Green MEP from Belgium’s humble Wallonia region could actually do something about it.
But about midnight on Wednesday, Mr Lamberts and his European parliament colleagues secured the prize they have doggedly pursued for almost a year – a strict bonus cap on the pay of Europe’s top-flight financiers and star traders.
The politics is now so advanced that bank chief executives, David Cameron, George Osborne and the Westminster parliament are all pretty much helpless to stop it. Mr Lamberts’ victory is not only reshaping how banks operate, it is providing a lesson to all in where power lies in Europe.
Howls of protest are rising over the City. Senior bankers are shocked, nervous and struggling to assess its implications. “We don’t know what we are going to do yet,” said one executive at a big US bank. “Should we move operations to Switzerland or Dubai? We would think about it, but it isn’t that easy to move staff.”
Another banker called it an “anti-London rule” that exposed the lack of UK clout in Brussels. “This EU move has the ability to take the City down,” he said.
For all the fuss now, few took Mr Lamberts seriously when he first raised the idea of pegging bonuses to salary. He recalls one member of the parliament’s powerful finance committee told him to keep his “populist arguments” to himself.
But that was in private session. Slowly, support for the curbs started building among parliament’s negotiators. Some were convinced it was a good idea. But there was another powerful factor helping Mr Lamberts throughout: the political phobia over defending banker pay. “Who wants to be seen supporting big bonuses?” he said.
Once the main parties were backing the cap, the bank chiefs began to call. Mr Lamberts chatted bonuses with board level executives from two French, two German and three British banks. One even gave him a tour of a London trading floor. The calls “gave me comfort that we were on the right track”, he said with a chuckle.
One banker carrying the scars of trying to change Mr Lamberts’ mind said: “What Philippe lacks in knowledge and understanding of the banking sector and the merits of performance-related pay generally, he more than makes up for in certainty and stubbornness.”
“They had plenty of excuses,” said Mr Lamberts. “But the problem for them was the quantum. They want to be able to pay absurdly high amounts. It is not through competition, it is not value creation. It is linked to the ability to extract rent. Sometimes I feel like the last market liberal in town – I hate rent.”
Mr Lamberts is not your average Green. Most do not have a business background (he worked for IBM) and few list military plane spotting as a hobby. “For a Green to be watching bombers heading to Libya, that is really not very usual,” he admits.
He is also not a simple populist. He might have compared driving out overpaid bankers from Europe to clearing the streets of “drug dealers”, but apart from remuneration, he has sided with the UK on most bank regulation issues, pressing for more stringent standards on leverage and liquidity.
Two political factors were crucial to his success. The first was the unity of the parliament, which often misdirects its considerable powers. Here Mr Cameron’s decision to quit the the centre-right European People’s party may have been important. Othmar Karas, an EPP member, led the negotiating team and gave Mr Lamberts strong backing.
The second was political expediency. EU finance ministers must pass this legislation, for it enacts the biggest overhaul of bank capital rules since the financial crisis. They also hate discussing bonuses in public. Britain aside, all ministers decided these were good enough reason to let Mr Lamberts win. “If it came to a public debate, we would have the upper hand. They knew that,” said Mr Lamberts. “That doesn’t mean we are populists. They are just running scared of rational argument.”
URBAN DIVIDE Two short stops separate those who say ‘they’ll just have to double my salary’ from those who think ‘they should be getting less’
Bottles of Bollinger line the windows of one of Canary Wharf’s plushest restaurants and EU plans for a cap on bankers’ bonuses do not look set to derail the night’s Champagne karaoke event, Hannah Kuchler reports.
“They’ll just have to double my salary then,” said one banker, of the bonus cap, as he marched to lunch on Friday.
Ross Johnson, a banker who has not received a bonus for four years, pointed to the skyscrapers. “All this will be gone, to satisfy a few lefties,” he said.
Douglas Monroe, who also works in the industry, called on the UK prime minister to stand behind the bankers. “It is a plot by the Germans. They’ve been after London’s business for years.”
A pair of commercial property developers worried about the knock-on effect for their business. “If I was a banker I’d move to Singapore,” one said. The banking industry is vital for the UK, so if there have to be a “few fat cats” then they should “give them the cream”, he said.
Two short stops down the Docklands rail line in Poplar, the towering signs of Barclays, HSBC and Bank of America dominate the skyline but the surroundings are much shabbier.
Hanging around outside his further education college, Omar Mahood, 17, is less keen on letting bankers have their cream. “It’s rubbish,” he said. “We bailed them out so they should be getting less.”
Mr Cameron should not worry about bankers going abroad, he said. “It is just an excuse. He should try and see if they leave.”
In the Poplar Fried Chicken shop, Nor Mahbob, 18, knows exactly how much of Royal Bank of Scotland is owned by the taxpayer. “82 per cent,” he said confidently.
“They got us into this recession and now they say they are so important they shouldn’t cut their pay?” he asked.
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