Enough with the banker bashing

17 Jan

Here we go again.  Just when we thought that the misguided rhetoric regarding bankers’ bonuses – and those of others in financial services  – had finally subsided, the Labour party has begun a fresh wave of banker bashing.


Perhaps unsurprisingly, the state/taxpayer-owned RBS is the one that’s really in  the line of fire.  Ed Miliband, the Labour leader, in a raft of what the party calls “new bank reforms” is calling for the government to stop staff earning more than 100 per cent of base salary in bonuses.


“[David Cameron] should be able to say to people earning £1m that a bonus of £1million should be quite enough,” declared Miliband on Wednesday.


When other banks – which are of course RBS’ competitors – are paying 200 per cent bonuses, Labour’s grandstanding falls apart.  Also, less than 100 RBS bankers were awarded bonuses of £1million last year.  At one competitor, more than 400 employees received this level of bonus, or more.


It will be, frankly, impossible to retain the best bankers at RBS, and therefore to return the bank to the public sector, if the remuneration packages are not competitive within the industry.


It seems increasingly obvious that many politicians simply dislike the pay variables in the finance world.  But, of course, if bonuses were banned, base pay would simply need to rise to compensate.  And if this happened, what would happen next? Would MPs start demanding caps on wages?  If so, then we really do start to move into dangerous territory.


In addition, I think that Labour needs to take into account that bankers’ bonuses are usually subject to ‘claw back’ procedures, are frequently pushed back, and are often paid out in equities, rather than cash.  Consideration should also be given to the fact that if the remuneration packages were only paid out as base pay, naturally banks’ fixed costs soar and the risks become significantly greater.


Once again, I’m delighted to see the Bank of England governor, Mark Carney has slammed the banker-bashing.  Speaking to reporters yesterday on the subject, he described Labour’s so-called ‘bank reforms’ as a “crude bonus cap.”


Carney’s commendable stance on this issue, follows his robust defence of the financial services sector in October, when he said, amongst other things, that he would be happy to see Britain develop an even bigger banking and financial services sector over the coming decades.


Nigel Green deVere Group

Blog written 17th January



Your comment

Your email address will not be published. Required fields are marked *

Financial Health Quiz

Discover your financial well-being with the Financial Health Quiz.

In just 2 minutes, assess your finances, get personalized results, and actionable steps – all for free.

Take the quiz

Get the latest from Nigel Green