MEP: No blank bonus cheques
PUBLISHED: 14:16 09 December 2009 | UPDATED: 11:17 23 August 2010
BONUSES for bankers should be slashed until they start achieving results, according to a Euro MEP. Sharon Bowles, who represents north Kent, made the recommendation as bosses at the Royal Bank of Scotland, which is now state-owned, threatened to quit if
BONUSES for bankers should be slashed until they start achieving results, according to a Euro MEP.
Sharon Bowles, who represents north Kent, made the recommendation as bosses at the Royal Bank of Scotland, which is now state-owned, threatened to quit if their bonuses are capped.
The Treasury has announced they may veto a £1.5billion bonus pool that the RBS has established.
Mrs Bowles said: "We have to end the current situation in which bankers are making massive bonuses on the basis of low interest rates rather than high skill.
"Many British banks are now state-owned and it is the taxpayer that is footing the bill for this.
"Instead of rewarding bankers for easy profits based on cheap lending, they should instead be rewarded for real achievements.
"That means bonuses should be linked to the cost of capital. Bonuses should not be more than half of what it would have cost to raise the money by other means."
The Liberal Democrat MEP is chair of the European Parliament's powerful Economic and Monetary Affairs Committee.
Bankers' bonuses are being debated as part of the review of the Capital Requirements Directive and will be voted on in the European Parliament next year.
She said: "As chair of the Economic and Monetary Affairs Committee, it is my job to find effective solutions that will work in the real world."
Despite the row RBS bankers have some support from the Government in the form of Business Secretary Lord Mandelson.
He says that all financial institutions have a duty to act as a unit and only then should a cap be placed on the bankers.
Mr Mandelson said: "I understand the point that RBS directors are expressing - they say they have to remain competitive in the market in recruiting senior executives and this is why it's important that all the banks are equally restrained and RBS is not singled out."
The RBS board feels it might need to pay its investment bankers higher bonuses to keep them at the company and that if top talent left the bank would be less profitable.