Starting at 4.30pm today, the EU Parliament’s Monetary Affairs Committee will debate and then vote upon the proposal that banking bonuses should be restricted to no more than 100% of banking salaries.
By all accounts, they’re likely to vote in favour of the move. Members of the Monetary Affairs Committe include various prominent socialists: You can watch the vote live here. The chair is Sharon Bowles, a UK Liberal Democrat MP, whose son Damien ironically works as a bond analyst in the City.
Once the vote has passed, the entire bill will go to the European Commission for ratification. Within one year, bonuses and salaries could be equable, at best.
Based on average compensation for regulated staff at European and US banks, this implies a massive pay cut, or a massive hike in salaries. If salaries are hiked to a level allowing compensation to remain steady, they will rise to the levels in the headline.
As the Telegraph notes, such a massive rise in fixed costs could clearly lead to a massive rise in redundancies – particularly in the context of falling revenues.
Or will it?
As the chart below from JPMorgan’s analysts makes clear, banks have already lost control over annual compensation costs. A substantial increase in salaries may make no difference.