It might be easy to dismiss some moans about European changes as industry special pleading but the question has to be asked – how much more can this sector take?
Responding to constant attacks on bankers’ pay, European Union countries – with the notable dissent of the UK – have agreed that bankers will not be able to receive bonuses bigger than their base salaries from 2014, although that ceiling could be doubled if bank shareholders agree. UK finance minister George Osborne, who is gearing up for his annual budget on 20 March, is reportedly trying to get this move watered down.
Lest anyone think this sort of move is the first step back towards 1970s-style wage and price controls (that is not an encouraging thought), there have been precedents. Financial institutions of various types in the UK, for example, are already forced to defer a portion of pay to encourage long-term remuneration (and hopefully, behaviour). This sounds sensible until one realises that this measure clashes with a UK Treasury crackdown on schemes called employment benefit trusts, which seek to benefit more from lower tax on capital gains than on income. (To read more about this issue, click here.)
In Switzerland, meanwhile, voters have backed measures to curb executives' pay. The measures include giving shareholders a binding vote on executive pay, banning “golden hellos” and stopping bonuses that encourage buying or selling firms (quite how this can be clearly interpreted is uncertain). Boards of directors that fail to comply face jail terms. Anyone who imagined that Swiss banking was an easy ride can think again.
There’s more. On 14 February, the European Commission proposed a directive to implement a financial transaction tax – sometimes dubbed by supportive campaigners as a “Robin Hood tax”, that would hit eurozone states and, quite possibly in time, all EU states including the UK. Again, the impact on the UK, which has the largest financial centre in Europe, could be disproportionately severe. Non-EU financial centre practitioners, such as in Singapore, must be rubbing their hands. And other measures to add to the compliance watch-list include the US FATCA Act, Dodd-Frank; EU proposed anti-money laundering rules; tougher AML rules in Hong Kong; UK clampdowns on sales of "unsuitable products"; updated Basel bank capital rules; Solvency II insurance rules, and EU controls on hedge funds. I am sure there are rules I have missed in this fat list.