Capping bankers’ bonuses would be dangerous for financial stability
28 February 2013
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Capping bankers' bonuses would drive business and talent away from the UK
Commenting on the European Parliament’s provisional deal to cap bankers’ bonuses, Mark Littlewood, Director General at the Institute of Economic Affairs, said:
“This is an arbitrary move which will serve only to drive business and talent away from the UK. With a larger financial services sector than other member states, this policy will have a disproportionately damaging effect on the UK economy.
“Aside from undermining the competitiveness of the UK’s financial sector, the introduction of caps would be highly dangerous. Increasing the fixed costs of banks would mean they would be unable to reduce their costs when things go wrong. Removing the ability to control risk is the worst possible strategy.
“If the EU is to insist on regulatory measures then it would be better advised to defer bonuses by providing them in shares, which national regulators have gone some way to achieving. This is yet another example of the European Parliament trying to exercise its muscle without any rationale.“
Notes to Editors:
To arrange an interview with an IEA spokesperson, please contact Stephanie Lis, Director of Communications: 020 7799 8909, slis@iea.org.uk
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
The IEA is a registered educational charity and independent of all political parties.
“This is an arbitrary move which will serve only to drive business and talent away from the UK. With a larger financial services sector than other member states, this policy will have a disproportionately damaging effect on the UK economy.
“Aside from undermining the competitiveness of the UK’s financial sector, the introduction of caps would be highly dangerous. Increasing the fixed costs of banks would mean they would be unable to reduce their costs when things go wrong. Removing the ability to control risk is the worst possible strategy.
“If the EU is to insist on regulatory measures then it would be better advised to defer bonuses by providing them in shares, which national regulators have gone some way to achieving. This is yet another example of the European Parliament trying to exercise its muscle without any rationale.“
Notes to Editors:
To arrange an interview with an IEA spokesperson, please contact Stephanie Lis, Director of Communications: 020 7799 8909, slis@iea.org.uk
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
The IEA is a registered educational charity and independent of all political parties.
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