European regulators have ushered in a tough set of restrictions on the bonuses that banks will be allowed to pay off their staff.
Under the proposed guidelines announced by the Committee of European Banking Supervisors (Cebs), only 20-30 per cent of bonuses can be paid in upfront cash, which is much tougher than those agreed by the G20 countries claimed Tomorrow's Company.
Under the so-called Basel III rules, international banks will have to provide a ‘score card’ for each banker to prove they deserve a bonus.
Tony Manwaring, chief executive of the independent international think tank, said the rules could help bring about a profound and welcome change of culture in the sector, but warned of dangers to the future success of the City if they were implemented in isolation and not fully thought through.
He said: "These reforms could be an important step forward in changing the culture of financial services by tackling the incentives for bankers to take dangerous risks to inflate their own earnings, at the expense of individual clients and customers, and the economy as a whole.
"These reforms should also help reinforce rebuilding the capital reserves of banks.
"In so doing, they can help rebuild restore trust and renew the City’s ‘licence to operate’.
"For the UK, the litmus test of these reforms must be the sustainable future success of the City. From this perspective, they are part of, but not the whole solution. On their own could even damage the UK economy."
Source: http://www.ftadviser.com
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