1 Mar 2013

London mayor says EU bank bonus cap self-defeating

2:45 pm on 1 March 2013

London mayor Boris Johnson has lashed out at a European Union cap on bankers' bonuses warning that the move will drive banking business from the city.

Bankers in Europe face a cap on bonuses as early as next year, following a provisional agreement in Brussels to introduce what would be the world's strictest pay curbs.

Under the deal, bankers face an automatic bonus cap set at a par with their basic salaries, though shareholders can agree to double this cap.

High bonuses have been blamed for risky behaviour which contributed towards the 2008 global financial crisis.

London mayor Boris Johnson said the move was self-defeating. "The most this measure can hope to achieve is a boost for Zurich and Singapore and New York at the expense of a struggling EU," he said.

"This is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman empire."

Prime Minister David Cameron indicated that Britain would review the provisional deal at an EU finance ministers' meeting next week in Brussels, Reuters reports.

He said regulation must be flexible enough to allow major international banks that are based in the Britain but have branches all over the world to continue competing and succeeding while being located in the UK.

London is home to over one third of the global foreign exchange market and is by far the biggest financial centre in the EU.

The bonus rules will apply to all banks - American, Asian, Russian or European - based in Europe, and to units of European banks located abroad, so a Deutsche Bank employee working in New York or Tokyo would be subject to the same limits.