Heavy regulation on bonuses risks undermining the City


Press Release

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Monetary Policy

Philip Booth comments on the poor economic performance of Germany and France

Mark Littlewood responds to the Bank of England's tough plans for bonuses

Commenting on the decision of the Bank of England to enforce tougher rules on the clawing back of bonuses, Mark Littlewood, Director General of the Institute of Economic Affairs said:

“If the Bank of England is serious about fostering an ethical culture in the UK banking sector, a clawback scheme on bonuses is entirely the wrong way to go about it.

“The financial industry is already one of the most heavily regulated in the economy. If we persist with this upward trend of regulation, we risk undermining the City and pushing both talent and investment overseas. If implemented, this proposal will be fraught with legal difficulties, adding a further burden to the banking industry and its employees.

“Bonuses incentivise high performance and regulation as severe as this will weaken that incentive. Trust in the banking sector is important but achieving it should not be to the detriment of the industry as a whole.”

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Notes to editors:

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.