Chief Market Strategist, Cantor Index
VIEW FROM THE CITY
THIS is possibly the most deluded measure to come from Europe since the Emperor Diocletian tried to fix the price of groceries across the Roman Empire.” I would not dream of attempting to emulate Boris Johnson’s erudite analogy in responding to the EU’s ludicrous proposal to limit bonus emoluments to 100 per cent of base salary (up to 200 per cent with shareholder approval).
However, after 50 years of commitment to the City of London, I can certainly come to the support of the financial service sector. Over the past 40 years, it has contributed to the coffers of the UK Treasury, and accounted for around ten per cent of GDP. There have been a few examples of unacceptable behaviour in the years surrounding the financial crisis, but the vast majority of people who work in the sector are decent, hard-working folk. Nonetheless, the implementation of more stringent regulation is both necessary and desirable.
It is very possible that the EU has no aspirations for its banks to compete on a global basis. That is their prerogative, but they cannot fail to realise that banking is global. And the UK, regrettably bound by Gordon Brown’s signature on the Treaty of Lisbon, has become embroiled in an agreement that will potentially damage one of the top financial centres in the world: the City of London.
The lack of acknowledgement that Britain’s bonus culture has already drastically changed is frustrating. The cash element is small. Share incentive schemes are drawn up over three years and repayment on failure to achieve targets and transgressions are now in place. The implementation of bonus restriction will drive salaries up to ludicrous and unsustainable levels. Meanwhile, other financial centres, like New York and Singapore, are waiting to capitalise on the fallout from these bonus constraints.
London is the centre of the time zone and English the international trading language of the world. In comparison, Frankfurt, Paris, Milan and Madrid are inconsequential financial centres. And I pay little attention to what Switzerland may think.
This proposed legislation – as with any idea of a transaction tax – would be an act of folly. We can only hope that the doubts expressed by David Cameron, George Osborne and Michael Fallon lead to London’s exemption from these counter productive measures. New York has already stolen a march on regulating their banks first. The UK has erroneously waited for the EU. The time has come to plough our own furrow.