Killing the goose that lays the golden eggs...in London

michaels

http://www.bbc.co.uk/news/business-21608938

The EU have voted to cap bankers bonuses at 1x basic annual income. Sounds good but for the UK it means:

A lot of the banking sector (where we earn foreign income to pay for such nice to haves as imported gas and petrol) will consider moving to more friendly places like Switzerland, the gulf or Hong Kong/Singapore or even back to New York (it only came here in the first place because of US regulations). Those who would like to see the industry go will no doubt be happy to see govt spending on health, education etc cut to make up for the 10% shortfall in revenue.

And talking of lost revenue how much tax has the treasury received in the last 10 years on bonuses above 100% of basic salary - I wouldn't be surprised if it has paid for at least one year of the NHS - oh well lets kiss goodbye all those extra consultants, modern drugs and fancy imaging machines.

purch

A: The bonus cap will never actually happen. (makes a nice headline)

B: Banks will not be moving

Generali

Presumably all that will happen is either:

1. Salaries will be increased
2. Bankers will come up with a way around it (they're quite a bright bunch you know, you don't bring an entire financial system to it's knees by blind luck)

There have been some great wheezes down the years. Paying bonuses in gold or even copper to avoid NI, giving loans in Turkish Lira which tended to depreciate in value quite predictably each year (until one year it went up - that ended badly). The devil will be in the detail.

It wouldn't surprise me to see a large part of the industry go to Sing or HK either. Both are English speaking, respect property rights, no withholding tax on bond coupons (interest payments) and are quite nice places to live. Oh and the income tax rate in each is < 20% in both places so they're good places to get rich.

Be careful for what you wish as you might just get it!

vivatifosi

It will be back to the law of unintended consequences. The bonuses will then be made part of the salary, meaning that when people genuinely don't deserve it, it will be impossible to remove.

This is a mad move. It would be far more logical to build a long term element into bonuses so that they reflect something more accountable over a period of time.

BertieUK

I find it hard to believe all this squabbling going on in the banking world, they work with money and then let money rule their lives which I find rather sad, there is far more to life than saying that I will take my employment to another country if I cannot get my bonuses here in the UK.

And then you get todays headlines...

...Royal Bank of Scotland (RBS) has reported its fifth year of losses since it was bailed out by the government in 2008, hit by fines and mis-selling charges.

Not wishing to anger you Generali but this bunch are not so bright as to end up with this result, no doubt they will come up with a very good reason though.

purch

From what I have read, it's a proposal that has been agreed in principal.

Hardly an actual Cap.

You rarely hear Banks or "Bankers" saying they will move offshore. It's usually the so called "experts" who know sod all about just about everything.

Generali

BertieUK wrote: »

I find it hard to believe all this squabbling going on in the banking world, they work with money and then let money rule their lives which I find rather sad, there is far more to life than saying that I will take my employment to another country if I cannot get my bonuses here in the UK.

And then you get todays headlines...

...Royal Bank of Scotland (RBS) has reported its fifth year of losses since it was bailed out by the government in 2008, hit by fines and mis-selling charges.

Not wishing to anger you Generali but this bunch are not so bright as to end up with this result, no doubt they will come up with a very good reason though.

I'll suspend judgement until I see their results.

Much of the banking industry in much of the world continues to make huge profits.

BertieUK

Generali wrote: »

Much of the banking industry in much of the world continues to make huge profits.

This is a result that we would like to see happen, rewards from investments made, but we here in the UK seem to be getting more negatives than ever before.:(

shortchanged_2

michaels wrote: »

http://www.bbc.co.uk/news/
A lot of the banking sector (where we earn foreign income to pay for such nice to haves as imported gas and petrol) will consider moving to more friendly places like Switzerland, the gulf or Hong Kong/Singapore or even back to New York (it only came here in the first place because of US regulations).

Great, won't this further help reduce the unemployment figures because I'm sure there are plenty of people out there who would step in to fill the void by those leaving.

princeofpounds

Headline net loss results can often mean very very little.*

Often they are the result of charges called impairments, which are non-cash costs. Effectively, that means they are not real and are merely accounting conventions to downgrade the value of an asset on paper. This has been one major reason for all the paper losses that you see.

Or, in the case of banks, they can be the result of provisions, which are charges built up to provide a cushion against loans that have gone bad.

In a way, they are like lots of little impairments on each indivdual loan, although the main difference is that in the case of an impairment of an asset like an acquired business, the business has normally already showed it is underperforming in them numbers. Whereas for a bad loan, it's more of a reflection of anticipated future underperformance of the loan.

Because banks typically have a huge stock of loans and business assets which have been on the balance sheet for a long time, it's entirely possible that losses today are reflective of decisions taken some time ago, and that actually the profitability of the current and future business is far far better than current headline earnings would suggest.

But I don't think you ever see proper analysis of company results in the media, and I don't blame them really because it's often too complex to explain to people who don't understand the basics of accounting and bsuiness models.

* not seeking to excuse bad performance where it exists, just making a general cautionary point about the 'profit' numbers you hear in the press for all sorts of businesses.

grizzly1911

Generali wrote: »

I'll suspend judgement until I see their results.

Much of the banking industry in much of the world continues to make huge profits.

Do the play better poker to? Their gain our loss?