Capping bankers’ bonuses would be dangerous for financial stability

Capping bankers' bonuses would drive business and talent away from the UK

Commenting on the European Parliament’s provisional deal to cap bankers' bonuses, Mark Littlewood, Director General at the Institute of Economic Affairs, said:

“This is an arbitrary move which will serve only to drive business and talent away from the UK. With a larger financial services sector than other member states, this policy will have a disproportionately damaging effect on the UK economy.

“Aside from undermining the competitiveness of the UK’s financial sector, the introduction of caps would be highly dangerous. Increasing the fixed costs of banks would mean they would be unable to reduce their costs when things go wrong. Removing the ability to control risk is the worst possible strategy.

“If the EU is to insist on regulatory measures then it would be better advised to defer bonuses by providing them in shares, which national regulators have gone some way to achieving. This is yet another example of the European Parliament trying to exercise its muscle without any rationale.“

Notes to Editors:

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