B.O.E. gets tougher on bankers
Discussion
Announced this morning on the BeeB. The bankers bonus payments will be deferred for seven years, up from the present 3/4 years. Seven years is thought to be the time lapse required for any bankers misbehaviour that contributed to a bonus payment being uncovered. In the event that any errant banker has spent the money action will follow to recover said payment, I presume a Regularity Body would use presume asset seizures through Law Courts.
Obviously its another minor turn of the screw in an attempt to placate the great British public.
Obviously its another minor turn of the screw in an attempt to placate the great British public.
crankedup said:
Obviously its another minor turn of the screw in an attempt to placate the great British public.
It sounds like a reasonable position to me. If bonuses are based on performance..........how can you award said bonus unless both the positive and negative aspects of that performance can be accurately assessed.
The longer it takes to make that assessment - the longer the period between bonus payments. Makes sense surely?
7 years is totally OTT, a lot changes in that time, much of it not directly attributable to the poor sod on the ground at a specific bank who may end up with well over 5x annual base salary being demanded back.
If this ever happened (not that i hope it to) I would ensure I'm in no position to repay - transfer all assets into spouse name etc. and become a (spouse/trust fund sponsored) man of straw, get benefits too then!
If this ever happened (not that i hope it to) I would ensure I'm in no position to repay - transfer all assets into spouse name etc. and become a (spouse/trust fund sponsored) man of straw, get benefits too then!
Moonhawk said:
crankedup said:
Obviously its another minor turn of the screw in an attempt to placate the great British public.
It sounds like a reasonable position to me. If bonuses are based on performance..........how can you award said bonus unless both the positive and negative aspects of that performance can be accurately assessed.
The longer it takes to make that assessment - the longer the period between bonus payments. Makes sense surely?
Seven years is a long time, but the principle is something that Siegmund Warburg alluded to years ago when he suggested that huge bonuses could not be justified when there were no balancing penalties for the years when the banker produced losses or when profits in repesct of which a bonus had been awarded were reversed.
I think legislation like this will probably be passed. It is populist. People outside the sector will instinctively feel it is right.
There will be quite considerable unintended consequences however. This is quite simply because no-one has made the effort to properly identify just what a "banker" actually is.
Will this affect employees of a UK registered banking organisation that holds a banking license in the UK?
What about people working in the UK office of other financial firms that are not banks? Like hedge funds, or private equity funds for example?
What about fund managers? Are they the same as bankers?
What about fund managers or bankers in other places like New York, Dubai or Hong Kong, who work for a foreign subsidiary of a UK bank?
What if the "banker" is doing work that is not related to the balance sheet of his employer and therefore cannot actually "cause harm"?
What if I am a banker working for a Uk bank - can I simply stop being a banker and shift my contract so that I am technically employed by a Singapore based hedge fund SPV for example?
It is a complex industry, global economics. Bloody complex. Populist, simple solutions that appease the electorate are just as likely to make things worse as they are going to make things better. Still, the public get to give the bogeyman a good kicking, so thats all good then.
There will be quite considerable unintended consequences however. This is quite simply because no-one has made the effort to properly identify just what a "banker" actually is.
Will this affect employees of a UK registered banking organisation that holds a banking license in the UK?
What about people working in the UK office of other financial firms that are not banks? Like hedge funds, or private equity funds for example?
What about fund managers? Are they the same as bankers?
What about fund managers or bankers in other places like New York, Dubai or Hong Kong, who work for a foreign subsidiary of a UK bank?
What if the "banker" is doing work that is not related to the balance sheet of his employer and therefore cannot actually "cause harm"?
What if I am a banker working for a Uk bank - can I simply stop being a banker and shift my contract so that I am technically employed by a Singapore based hedge fund SPV for example?
It is a complex industry, global economics. Bloody complex. Populist, simple solutions that appease the electorate are just as likely to make things worse as they are going to make things better. Still, the public get to give the bogeyman a good kicking, so thats all good then.
Moonhawk said:
It sounds like a reasonable position to me.
Sounds like just another political move with unintended consequences to me. Can you name the two banks with by far the toughest bonus retention clauses prior to the financial crisis? (It was Lehman and Bear Stearns with a 5 year retention period)fblm said:
Sounds like just another political move with unintended consequences to me. Can you name the two banks with by far the toughest bonus retention clauses prior to the financial crisis? (It was Lehman and Bear Stearns with a 5 year retention period)
Possibly demonstrating that 5 years wasn't long enough?Whether such a proposal is feasible in reality will come down to the specifics - but in principle, the idea does have some merit. There have to be downsides to bankers taking excessive risks - or implementing strategies that have short term gain - but long term harm.
They can't take their bonuses and be long gone before the st hits the fan.
Edited by Moonhawk on Wednesday 30th July 14:59
Moonhawk said:
Possibly demonstrating that 5 years wasn't long enough?
No, in addition to the fact that most banks with shorter or no lockup periods did not take excessive risk or fail, it simply demonstrates there is no connection between the two. You'd think there would be but the evidence is otherwise.Moonhawk said:
Whether such a proposal is feasible in reality will come down to the specifics - but in principle, the idea does have some merit.
Evidence of the financial crisis suggests not.Moonhawk said:
There have to be downsides to bankers taking excessive risks - or implementing strategies that have short term gain - but long term harm.
Agreed, but blindly implimenting policies to satiate the public that evidently didn't work previously is playing dumb politics not fixing anything. When everyone was bleating about bonuses the politicians demanded smaller bonuses, personally I got a slightly smaller bonus, but my salary doubled, some quadrupled; unintended consequences. If I were working for a bank the longer the lockup the more I'd want, ie I'd want a higher bonus to cover the personal risk of holding the banks stock and for being effectively unable to ever leave; higher bonuses; unintended consequences. Moonhawk said:
fblm said:
Sounds like just another political move with unintended consequences to me. Can you name the two banks with by far the toughest bonus retention clauses prior to the financial crisis? (It was Lehman and Bear Stearns with a 5 year retention period)
Possibly demonstrating that 5 years wasn't long enough?Whether such a proposal is feasible in reality will come down to the specifics - but in principle, the idea does have some merit. There have to be downsides to bankers taking excessive risks - or implementing strategies that have short term gain - but long term harm.
This move will punish the 'Evil Banker (tm)' and placate the unthinking masses while doing little to prevent a recurrence of the crisis.
fblm said:
Agreed, but blindly implimenting policies to satiate the public that evidently didn't work previously is playing dumb politics not fixing anything. When everyone was bleating about bonuses the politicians demanded smaller bonuses, personally I got a slightly smaller bonus, but my salary doubled, some quadrupled; unintended consequences. If I were working for a bank the longer the lockup the more I'd want, ie I'd want a higher bonus to cover the personal risk of holding the banks stock and for being effectively unable to ever leave; higher bonuses; unintended consequences.
I guess suggestions on a postcard then......Mark Benson said:
Moonhawk said:
fblm said:
Sounds like just another political move with unintended consequences to me. Can you name the two banks with by far the toughest bonus retention clauses prior to the financial crisis? (It was Lehman and Bear Stearns with a 5 year retention period)
Possibly demonstrating that 5 years wasn't long enough?Whether such a proposal is feasible in reality will come down to the specifics - but in principle, the idea does have some merit. There have to be downsides to bankers taking excessive risks - or implementing strategies that have short term gain - but long term harm.
This move will punish the 'Evil Banker (tm)' and placate the unthinking masses while doing little to prevent a recurrence of the crisis.
Zod said:
Mark Benson said:
Moonhawk said:
fblm said:
Sounds like just another political move with unintended consequences to me. Can you name the two banks with by far the toughest bonus retention clauses prior to the financial crisis? (It was Lehman and Bear Stearns with a 5 year retention period)
Possibly demonstrating that 5 years wasn't long enough?Whether such a proposal is feasible in reality will come down to the specifics - but in principle, the idea does have some merit. There have to be downsides to bankers taking excessive risks - or implementing strategies that have short term gain - but long term harm.
This move will punish the 'Evil Banker (tm)' and placate the unthinking masses while doing little to prevent a recurrence of the crisis.
It was totally backed by Labour, in return it gave them cheap loans due to the meth head running the show, decided to sprint before it was out of diapers and screwed the pooch on that one, gave out huge sums of money that it had no way of sustaining.
Was that an investment bank?
No that was the first of the Labour safe banks.
Zod said:
Quite. People seem to forget that Lehman was a pure investment bank, while RBS was a large universal bank, with a mediocre investment bank that was brought down by a terrible acquisition and poor lending. At the smaller end, neither Northern Rock, nor Bradfrod & Bingley had anything to do with investment banking. All this talk of keeping the "safe" retail banks insulated from the risky "casino" investemnt banks is total bks.
It certainly misses the point that certain of the 'casino' banks, such as J P Morgan, had taken a far more conservative view of CDOs.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff