ALLIANCE FO§ DEMOCRACY

Bankers are counting on it

For years, bankers have palmed investors off with rubbish investments, and then handed out huge bonuses to those who have made huge profits for their banks, because they were the best liars, and recommended investments which were based on dubious analyses by the rating agencies. For a long time, it was not the done thing to admit that this would damage the banks, as well as the customers. Instead, bankers were considered as capable and crafty people, who would even have sold their grandmothers, as long as the premium was high enough.
Now that the bubble has burst, and the bankers can no longer hide behind their money market transactions, the premiums are also disappearing. Whatever one says, it should now be time for someone to explain to the taxpayers, who rescued the banks after they had lost billions, that these liars still receive premiums for their poor performances. So now, the European Union, in order not to be noticed as a top dealer, has devised new rules of the game and applied the brakes to the bonus merry-go-round.
With immediate effect, bankers’ bonuses are limited to a maximum of twice their basic salary. An ingenious solution one might think, but still too short-sighted, because banks will still be around in the future, even though business is being done as if there was no tomorrow. To restrict bankers’ bonuses in this way has simply meant that the European Banks increased the basic salaries, so that the balance is restored, because a bank chief in Europe earns very little in comparison to bank managers in the USA or Asia. The penalty has therefore been turned into a general increase in earnings. The aim of the EU is misguided – the bank customer now has to pay for the higher salaries of the functionaries (in addition to the investments, which are often only to the benefit of the banks, and the costs of avoiding the bankruptcy of the bank).
Real commitment to permanently change anything in the banking sector seems undesirable. The only hope is a supervisory authority established by the British central bank (Bank of England), which requires that bonuses can be claimed back up to seven years after payment if the heads of financial services are found to have made mistakes which damage the bank (and of course also the investor, and doubly so since he pays for the financial service and also for its losses). It remains to be seen whether the British can set a standard with this measure which would conjure up a real debate and reasonable consequences. For investors, for the banks and above all for the idea that banks are not institutions which only want to be around for two years.