Bankers are not stupid. This is hardly a controversial view in this newspaper, but it is a point which has been messily and repeatedly missed by EU regulators.
When the bonus cap came in it took next to no time for the banks to get around it. Now the hammer of the regulators is slowly swinging towards banks again, the nimble lawyers and pay consultants will have no trouble dancing out of its path again.
The scene resembles a giant game of whack-a-mole. But not only are the regulators failing to hit the mole – they are also doing harm to the rest of us each time they miss.
There is no way bankers will just put up with a permanent massive pay cut – and why should they? They do valuable work and want to reap the gains from that. And if pay is linked to results and paid in stock, then the deal is good for shareholders, too.
Barclays tried paying lower bonuses briefly, and staff in the US fled to rivals in their droves.
So banks created fixed allowances, adding to bankers’ salaries and letting them keep overall pay at roughly the same level as before.
If these allowances are banned by the authorities, so what? The terms of the payouts can be tweaked to achieve the desired effect. Observe.
The European Banking Authority wants to stop allowances being changed every year in line with performance. For instance, each job will come with a specific fixed allowance. What could possibly go wrong?
Of course, that is just too easy – the job title and responsibilities can be tweaked each year, resulting in a different fixed payment.
That is a simple example, but banks and the UK authorities are well aware of the principle and so this particular change to the EU rules holds no particular fear for them.
The bigger problem is the overall intention of the EU rules, which have actually caused some damage.
Ironically enough, the bankers themselves are in a better position thanks to these changes.
The real harm has been done to the banks themselves, wider financial stability, the customer and, potentially, the taxpayer.
The industry and British regulators had actually come up with a decent plan to make bonuses work well.
Awards would have to be given in shares and paid out over many years. If the bank failed, the shares would be worthless. If a deal went bad, the bonus could be revoked. If a banker misbehaved, the pay could be clawed back. All of this is better for the bank, the customer and the taxpayer than the system in place before the crash.
But the new EU rules ruin all this. They mean bankers get more cash, more quickly, and there is far less reason to behave well or think for the long term. Regulators and politicians have worked themselves into such a righteous fury that they are harming the people they claim to help, and helping those they want to harm.