The European Unions decision to cap bankers bonuses is deeply troubling. Normally, I admonish bankers for making off with too much of shareholders money. However, this cap might have serious implications for the way in which European financial institutions compete, as well as the role of London as a main financial centre.
The new law will cap bonuses at the level of salary or, with specific shareholder permission, twice the level of salary. It applies globally for European banks but only in Europe for global banks. Immediately, you have a playing field that is not level.
Some senior European bank managers have denied that the new rule is a threat, telling me that they can bring in rolling one-year contracts for senior staff to finesse the situation. Given the pedantic and thorough nature of European bureaucrats, I doubt bankers will be able to manoeuvre around the new rules easily.
A mole, who works at a US investment bank, relates that most of a recent three-hour European management board meeting was spent discussing the new bonus caps. Surely, in what bankers love to dub the war for talent, this is a large strike against European banks? Think about it: if you were one of Harvards brightest graduates emerging in to the real world today, would you prefer to receive employment offers from JPMorgan and Goldman Sachs, or Deutsche Bank and Barclays?