Q&A: BEHIND THE BONUS NOISE
Q.how long has this been brewing for?
A.The European Union’s strictures on bonuses are part of a wider directive demanding higher capital requirements from banks and a new attitude to risk-taking. Work began in earnest around a year ago, and MEPs have been explicit in linking the overhaul to the events of the financial crisis in 2008. Arlene McCarthy, who has been pushing for the legislation, said on Wednesday: “In the past two years the banks have failed to reform, and we are now doing the job for them.”
Q.will all hedge funds be affected?
A.Not every hedge fund in the UK will find itself under the EU’s glare. The rules will only apply to those vehicles operating under Europe’s harmonised framework on investment firms, and even then there will be exceptions depending on size and the local regulator’s interpretation of the law.
Q.are british-based banks equally worried?
A.Not overly. The UK moved quickly to implement G20-agreed caps on bonuses last year, and many banks – such as Barclays, which did not take government aid during the downturn – paid no cash bonuses to senior managers at all last year. Angela Knight, chief executive of the British Bankers’ Association, even suggests the EU-wide crackdown on lucrative pay deals could even out the competitive landscape and put European banks on the same footing as their British counterparts.