New Bank of England deputy governor warns of bonus cap risks

Andrew Bailey, the incoming deputy governor of the Bank of England, is appearing before the Treasury Select Committee. Our banking specialist Tim Wallace:

This highlights one of the main risks of the bonus cap, that by forcing bank costs from variable to fixed costs they will be unable to respond to bad economic results by reducing bonus payouts. Instead, they will have to lay off staff. What is intended as a measure to improve financial stability may in fact be destabilising.