The capping of banking bonuses has succeeded in restoring some faith back into the market, but will these restrictions deter young talent from pursuing careers in the city?
With a directive from Brussels in March imposing caps on banking bonuses, the effects have been felt far and wide. With the various scandals that have been blanket reported by the media, and customer dissatisfaction with services provided by financial service providers, there is an argument that rewarding failure projects a negative image on the banking industry as a whole. Unsurprisingly, an EU directive has therefore spurned the first ever legal curb on bankers’ bonuses.
In many ways, this is a practical solution to a far reaching scandal. In a single stroke of regulatory PR, capping bonuses will start to restore some faith in the market and the individuals who operate within it. George Osbourne has tried to head off these caps, but public perception has approved of the legislation.
Is this a double-edged sword?
The finance industry is one of the UK’s key contributors to our economy, and the city is renowned worldwide as a banking hub and a centre of excellence. Therefore, the environment naturally attracts talent not just from the UK, but all over the world, including New York, Hong Kong and Singapore.
The ability to foster and develop talent has always been at the core of the city’s ethos. However, restrictions being placed on bonuses will have long term effects on the attractiveness of the city as a place for the world’s best talent, particularly young talent. As has been seen across Europe, pay caps and decreases are forcing young and experienced professionals alike to look abroad for more beneficial prospects. Andrew Bailey, head of the PRA, has also warned that caps on bonuses could push up banking salaries by £500 million a year to try and diminish these effects.
What can be done?
Public perception has been a key factor in these issues. Bonuses for performers should be welcomed; bonuses for underachievers and those directly involved in banking scandals should be discouraged. Feeding into the philosophy of competitiveness and cooperation, complete transparency on bonus structures has been recommended to implement a proactive and forward thinking industry with a stronger emphasis on customer satisfaction, rather than one that has been perceived as lazy in its approach to resolving regulatory issues. This would also encourage those who strive for professional success and recognition to see the city as a nest for achieving pre-eminent reputations in an ever changing sector.
Get in touch
At Grovelands we encourage discussion from all over the banking industry, and would be keen to hear your views. We understand that regulations and caps directly impact our associates and would like to know what effect you feel these caps may have on the city’s competitiveness in the employment market. Join our LinkedIn group and contribute to the discussion.