So Gordy has now spoken about this, finally. My one criticism would be that it’s a bit late.
“He said that the culture of bank bonuses should be geared towards long-term success and that banks should be able to "claw back" bonuses if the bank later performed poorly.”
Fair enough for me, that rewards should be linked more closely to performance as too often it seems that the two are not linked, at the higher levels at least.
“He called for international co-ordination on the issue, but said he was not in favour of French proposals for a mandatory cap on banker pay.”
International co-ordination is vital, and a failure to do so would undermine the whole exercise. As usual, all eyes will be on America.
I’m not mad keen on the mandatory cap on bankers pay, for a start it’s not right to single out one group over any others. Secondly, how would the cap be decided and enforced?
“While he said the City had "overheated", he declined to support the words of the head of UK watchdog the Financial Services Authority (FSA), Lord Turner, who said in an interview published last week that the financial services sector had "grown beyond a socially reasonable size". Mr Brown said it was important to protect London's status as a world financial hub.”
Shows, I think, that Gordy is still in thrall to the City and is more scared of it than it is of him, which for a Labour prime minister strikes me as the wrong way round.
It’s good to know that at least some progress is being made on this and the sort of externalities which proved problematic are at least being addressed in thought, though perhaps not yet by deed.
“In August, the FSA unveiled a new code that stated bonuses should not be guaranteed for more than a year.
Senior employees should have their bonuses spread over three years under the code, which is due to take effect from January 2010.
The new rules, to link pay more closely with the long-term profitability of banks, are designed to address concerns that big bonuses led to excessive risk-taking at banks which contributed to the financial crisis.”
Sounds very promising, unfortunately it seems that legislation is required to make a more sustainable financial sector, so let’s hope that it runs well and the considerable ability in that sector is not just geared towards getting round the laws.
interesting that the FT editorial is called "Too much of a very good thing". Post on that in due course