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FSA chair Lord Turner attacks EU bankers’ bonus cap

Adair Turner
Lord Turner: Attacking EU bonus cap rules

FSA chairman Lord Turner has slammed EU proposals to cap bankers’ bonuses, claiming it will make it harder for regulators to control remuneration.

The EU is proposing that bankers’ bonuses cannot exceed their basic pay, sparking fears basic salaries could rise to compensate for lower bonus payments.

Speaking to the Parliamentary Commission on Banking Standards last week, Turner said there is a more intelligent way to reform bankers’ pay.

He said: “If we simply have an increase in salaries, then we will have less power to force deferred pay and less power to clawback money.

“It is quite right that we have made bonuses deferred, made payable in bail-in debts subject to clawback. If you go too far in saying there should not be bonuses at all, then we lose an element of flexibility.

“I am sympathetic with the objectives. My own feeling is that it would be better to lengthen deferral periods and demand more bonus is paid in bail-in debt or other instruments that disappear in failure rather than a cap on bonuses. It would be a more intelligent strengthening of the current regime.”

Former FSA head of training and competency David Jackman says: “A cap would be useful as we need to use every tool in the box to show bankers that pay must be proportionate. Turner has to strike a balance between being pro-City and helping consumers.”

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