Letter to The Times re bankers' bonuses by Sharon Bowles MEP
Sir,
Your 1st March editorial concerning bankers' bonuses has several inaccuracies.
First, MEPs from across the political spectrum have pointed out that the size of bonuses, linked for example to trading returns, induced over-risky behaviour and peddling of poorly understood products. This contributed significantly to the financial crisis. Greed turned to fraud in Libor-rigging and sales incentives have led to mis-selling on a grand scale. The financial crisis and paying billions in fines and compensation does threaten the capital and stability of banks, and deprives the real economy of lending.
Second the rules to curb bonuses and introduce clawback, which you proclaim came from regulators, in fact came from European legislation introducing the internationally agreed guidelines for bonuses. Much wriggling to minimise the guidelines has taken place by governments and regulators, and bonuses have continued to rise. True, clawback has at last begun to take effect now that fines are starting to bite, but if there is blatant disregard for calls for moderation just because they are only 'guidelines' what do you expect?
Competitiveness has been considered and that is why there will be monitoring. However if the effect of bonus regulation is to force introduction of new blood and new talent, instead of the cosy clique that fostered the Libor-rigging merry-go-round then maybe that is no bad thing. There also remain many good reasons for banks and capital markets to remain in London: access to the EU, perceived neutrality between certain major powers and legal framework for a start.
Banks have a monopoly on liquidity and intermediation, both of which are ultimately provided at public expense. They are not creators of value in themselves and the long term trend is to transform them into utilities rather than masters of the universe.
The moral imperative is clear and someone had to be prepared to break the culture. Europe is big enough to do this. London should embrace it.
Yours etc
Sharon Bowles, Liberal Democrat MEP and Chair of the Economic and Monetary Affairs Committee, European Parliament.