From Sharon Bowles MEP.
Sir, Andrea Leadsom claims (“Britain must do whatever it takes to nix the bonus cap”, March 5) that the cap on bankers’ bonuses is a “vengeful” proposal from the European Commission, aiming to restrict the UK financial services industry. This could not be further from the truth.
For a start, the cap was not proposed by “Brussels bureaucrats” but by directly elected MEPs in an amendment by the European parliament to the capital requirements directive. Furthermore, this directive is a transposition of the Basel III framework on international standards for capital and liquidity, for which the UK has been at the forefront in pushing for tougher standards of regulation. In fact, one of the UK victories was to have the flexibility to impose even stricter requirements, including the Vickers recommendations on ring-fencing banks, while respecting the overall EU regulatory framework and integrity of the single market. This was not a given.
Ms Leadsom also argues that the City risks losing talent to other global financial centres, but she notably leaves out mention of Switzerland, which has just voted for even tougher limits on executive pay for all companies, meaning that top European bankers are hardly likely to relocate to Zurich. Some countries will impose even tougher limits; for instance the Netherlands will limit bonuses to 20 per cent of fixed pay. In any case, there are many good reasons for banks and capital markets to remain in London, including access to the EU, perceived neutrality between certain major powers and a strong legal framework.
We know from bitter experience that the size of bonuses induced overly risky behaviour and the peddling of poorly understood products, contributing significantly to the financial crisis. Greed turned to fraud in the Libor-rigging scandal, and sales incentives led to mis-selling on a grand scale. Someone has to be prepared to break the bonus culture, and Europe is big enough to lead the way.
Sharon Bowles, Liberal Democrat, South East England, and Chair, Economic and Monetary Affairs Committee, European Parliament
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