I've not taken much interest in this whole bank-bonus-bashing frenzy or the ham-fisted EU regulations which will not doubt make matters worse (to be honest, it's one of those fights where I want both sides to lose), but the 'senior Britpolitician' quoted in CityAM seems to have nailed it:
BANKS will easily sidestep the European Union's crackdown on bonuses by raising base salaries and restructuring performance-related awards, consultants and senior politicians believe... A senior British politician, who asked not to be named, said banks could maintain high cash payouts simply by increasing the overall size of a bonus and linking the deferred element to impossible targets. "They'll easily get around it," he said.
What have we wrought in the UK?
1 hour ago
6 comments:
That sage fellow Andrew Smithers recommends that the trading banks be required to build up their reserves such that the bigger the bank, the proportionately bigger its reserves must be. He thinks that that would be a much better policy than fannying directly with the bankers' bonuses.
dearieme,
The main thing is some form of insurance. If someone is going to lend in the quite bonkers way that Crock did (rather than the more responsible attitude of Nationwide), then they should pay a higher premium for the higher risk.
I'd personally rather have insurance companies, than government assessing and underwriting that.
dearieme.
But raising Reserves will lower the amount of Holy Credit in the system, and lower the sacred unaffordable asset prices.
"I'd personally rather have insurance companies, than government assessing and underwriting that."
Like AIG did with Lehmans bonds?
Steven_L,
No. Because in that situation, there wasn't the sort of unlimited liability of Lloyds. And unfortunately, the government stepped in.
D, does he means "liquid reserves" (i.e. assets) or does he mean "shareholders' funds" (i.e. on the 'financed by' or 'liabilities' side)? See also what AC1 says.
JT, see what SL says. We need LVT to keep land prices down, a credibly threat of debt-for-equity swaps and no bank bailouts.
Insurance in this sense is codswallop - somebody has to put up the money and somebody has to take the risk of bad loans, so why shouldn't it be the same person doing both?
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