The European Union’s cap on bonuses for bankers is a major concern for many top financial firms operating in the UK. Government officials have planned a challenge to the ‘bank bonus legislation’ designed to protect the UK’s financial services industry.
Reforms passed by the EU government aimed at reducing bank bonuses have been harshly criticised by Chancellor George Osborne, who claims that Brussels is ‘going too far’ with its measures aimed at limiting the likelihood of another financial crisis.
Mr Osborne, as well as several representatives of the British Treasury, claim that the European Union bonus cap has been rushed by critics of financial services firms and that the legislation’s impact is largely unknown by its backers.
Critics of the laws claim that despite achieving their goals of capping bonuses, most of the caps on bank bonuses will instead encourage banks to push up the salaries of their staff in order to compensate for lost income.
They believe that this will result in banks that are riskier for consumers because of increased non-optional expenses. The laws are designed to reduce consumer risk by cutting bonus spending in the financial services industry.
Britain has taken several steps to control banker bonuses over the past year, such as a change to laws that require banks to delay bonuses so that rewarding bankers for short-term decisions is no longer possible.
The delay to bonuses is designed to increase long-term investment focus amongst the country’s top financial services firms and discourage the destructive behaviour that led to the last financial crisis.
Critics of the legislation claim that it was passed during a ‘time of public anger’ and that it will have serious unintended effects for the economy. The cap is the world’s toughest restriction on banker pay, and the majority of people affected by it reside and work in London.
