London house prices and rents, City of London, Canary Wharf, European Banking Authority: Bonus Caps

Mind the Cap

Low-income Londoners continue be squeezed out of their capital city by astronomical house prices and rents.

  These hikes are largely fuelled by huge unregulated bonuses enjoyed by City of London and Canary Wharf bankers, writes Paul Coleman.

  So Londoners might chuckle at bankers’ grief over a European Banking Authority plan to widen the scope of proposed bonus caps.

  Bankers deemed as ‘material risk-takers’ earning over €500,000 will see their ‘variable pay’ (or bonus) restricted to the same level as their salary – or twice that amount if shareholders explicitly approve.

Threshold

Bankers and their sympathetic politicians say the EBA proposal, affecting all banks across the European Union’s 27 member states, will ‘damage London’s financial competitiveness’.

   Barclays, for instance, has reportedly employed 393 ‘material risk-takers’ and 1,338 staff earning more than €592,000 in the past year.

  Earlier, the EBA had pondered but then dropped an idea to cap bonuses for bankers earning more than €250,000. The EBA wants to cap bonuses to stop bankers taking excessive risks with investors’ money, similar to those risks that led to the financial meltdown of 2008.

Get around

The European Parliament and European Commission still have to finalise the EBA proposals.

  Meanwhile, banks are looking at legal ways to mitigate and get around the caps.

So don’t expect London house prices and rents to start dipping.

Paul Coleman, London Intelligence, May 2013

© Words & Photo, London Intelligence.