Laughing all the way to the Bank
Five UK banks have bowed to Labour's showboating and class-envy-based posturing, and agreed to confess that the UK's housing bubble and the massive growth in the public sector and the selling of the gold for bargain basement prices and the increase in teenage pregancies was all their fault. Hair shirts for the bankers!
But wait a second. One thing that has been quite clear all along is that Brown, Darling and the rest of the Labour party have no fucking clue how Investment banking works.
We've talked about this before: the way everyone - including some politicians - firmly believes that bankers are presented with enormous sacks, crammed with twenty pound notes on January 1st every year. That's about as naively simplistic as believing that cutting VAT to 15% would make us all buy enormous plasma screen TV's the very next day. Oh, wait..
So, let’s have a look at the rules they've decided upon, and what difference they'll make:
• Minimum bonus agreements should be limited to just one year
Nearly all minimum bonus agreements already are for a year, at most. They're to get people to leave their previous job - and bonus - and take a chance with a new employer. And, in common with much of the bonus mechanism, fuck all is written down. It's all 'my word is my bond' in the City, old boy. And if you renege, you'll lose the staff and not get any more, so it sort of works. So, yes, Gordon, we'll go along with that one.
• Bonuses should be clawed back in the result of a person's poor performance
Yeah. Like that'll work. After you've paid the bonus, and the tax, and the NI, and bought and transferred the shares and share options that make up most of the bonus, you're then going to somehow claw all that back at a later date, are you? Is the taxman going to give back the tax? No. Can you transfer shares out of someone else’s' ownership? No. Will the cash even still be in the bankers' current account? No. Is this idea remotely fucking workable? No.
• Senior executives should have between 40% and 60% of their bonus payments deferred over three years, with at least 50% paid in shares. The same rule applies for other bank employees who make the most risky investment decisions
They already do, for fucks sake. Banks' hardly ever pay 100% cash bonuses. They pay them in a mixture of all sorts of things: stock, options, loans, wine, gold, whatever. Partly to be tax efficient, partly to - guess what - defer the payments over several years.
Does anyone really think that any bank wants to part with a shitload of cash immediately? No, they'll put together a 'package', technically worth the same, but structured so that the banker can't get his greedy paws on it for years. It saves the bank 'real' money and it ties the banker in. Duh!
• Firms will be required to publish an annual report on their bonus payments
What, because they haven't before? What did they do, put them down as Stationary? Charitable Donation? Nah. Banks already publish the figures. How else do you think the tabloids get hold of them, and splash them all over the place with monotonous regularity?
• Large banks should have an independent committee to determine bonus payments
Yeah. That's a good idea. You could call it a Remuneration Committee. Oh, wait..
• Banks must ensure that their total remuneration payments to staff do not affect the underlying financial health of the business.
Yes, because they would never think to do that without this witless legislation, would they? They'd just give away all their cash in a bonus frenzy, then have to go out of business because they didn't keep enough in reserve to pay the bills. Thank goodness Alastair - who's never even run a whelk stall - is there to advise a global organisation how to behave.
For fucks' sake. None of these 'new' rules have anything to do with good governance, financial sense or even prudence. They're all just a lot of pointless showboating, by a party desperately trying to regain the public's favour, and desperately trying to put the blame for the recession on everyone else.
And none of them will make the slightest bit of difference to the way the banks work, and entice and retain the best staff.
No wonder the banks signed up so willingly.
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