The Pay Wars: Bankers Strike Back

As bonus season looms, bankers are striking back against attempts to regulate pay. Goldman Sachs has already announced its decision to absorb the tax hit imposed by the UK government on bonuses above £25K. The FSA has struck back with a new move aimed at those earning over £1 million. I'll have plenty to say about pay on this blog over the next few weeks. For now, here's some background reading.
From The Times report:

BANKERS earning more than £1m a year are to be hit by a new bonus clampdown laun-ched by the Financial Services Authority (FSA).

Up to 5,000 City bankers are expected to be caught by the new restrictions, which expand on the regulator’s existing code on pay. About £40 billion is expected to be paid globally in salary and bonuses by the world’s biggest investment banks.

Under the FSA’s new proposals, any employee of a UK bank who earns a seven-figure sum will be forced to defer 60% of his or her bonus for three years.

The £1m figure includes salary and bonus, but only the payment of bonuses will be subject to the deferrals. The guidelines could provide an extra incentive for banks to raise salaries rather than pay big bonuses.

The change has added to the banks’ anger over Alistair Darling’s 50% tax on bonuses above £25,000. A group of the biggest banks is considering legal action against the government over the tax, claiming that it breaches a number of principles of European law.

Bankers are fighting back:
Human-rights legislation could also be used to challenge the law. Tim Eicke, barrister at the Essex Court Chambers who specialises in human-rights law and EC law, said: “The European Convention on Human Rights protects a person’s or a legal entity’s right to peaceful enjoyment of possessions. For the banks this would be a difficult fight to fight, but considering the amount of money at stake here it may be worthwhile.”

It is hilarious to read about bankers using human rights laws to protect their pockets. Unlikely to get them very far.

The NY Times also has an article on the topic of angry bankers:

... the new rules are causing some American banks — JPMorgan Chase and Goldman Sachs in particular — to reassess their once-cast-iron commitments to using London as a major financial hub and operations center. “It is very dangerous to lead the pack in regulation like this,” said Stuart Fraser, the policy chairman of the City of London. “You can only push people so far.”

Bankers everywhere are a favorite punching bag, especially now with bonuses expected to be high and perceptions increasing that loose money and a quick return to profitability is spurring a return to the type of risk-taking that led to the crisis. But Britain, despite its heavy reliance on the financial sector to drive its economy and generate tax revenue, is one of the few places that has actually taken concrete steps against banking excesses.

Now, even some in the center-left Labour government are starting to question whether lashing out at banks — popular as that may be among aggrieved voters — has gone too far.

...

even if the more banker-friendly Conservatives win a majority in Parliament, the approach to regulation is not likely to change as long as Adair Turner, the activist head of the Financial Services Authority, is calling the tune.

And with regulators in neighboring European capitals, to say nothing of New York itself, increasingly likely to follow London’s lead, there may not be many places for banks to hide.