Bankers’ bonuses get mentioned in the media again and again and again and again and yet again. Much gnashing of teeth and wearing of hairshirts isn’t going to solve the problem, although it is better than ignoring the problem altogether. Whilst it is good that UBS has acknowledged that bonuses should be based on profits, rather than income earned, I find it depressing that in these articles no-one is focussing on two of the points I made in my previous post:-
- The differentiation between investment and lending bankers. Not only are their activities quite different and need to be remunerated accordingly, but their contribution to profits (more on that in another post) is quite different.
- Any changes must be made across the whole of the financial services industry – not just the banking sector, So long as those who manage capital funds who invest in (and alongside) banks are rewarded with bonuses based on short-term performance, they have no interest at all in seeing changes in the way bank bosses and employees are remunerated.
The BBA have some right to ask that discussions take place behind closed doors (but there is always the suspicion that they might be protecting bank bosses, who they effectively represent), but their implication that any changes must be global is the crucial point: any one country bringing in tightening of regulations can expect to see their financial services industry moving to another country pretty quickly.