Tullett Prebon Plc and Standard Chartered Plc, Britain’s second-largest bank, criticized European Union plans to cap bonuses at twice bankers’ base salary, saying they risk damaging their global competitiveness.
“It won’t do anything positive in terms of controlling remuneration, but I think it will cause damage to individual companies and I genuinely think it will cause business to leave London,” Tullett Chief Executive Officer Terry Smith said by telephone from London today. “It will just shift the balance from variable remuneration into fixed remuneration, which from the standpoint of anyone operating a business has to be a negative.”
EU plans to limit compensation and require a shareholder vote to approve any bonuses that top base salary are being opposed by the British government and financial firms who say the proposals will limit their ability to reduce costs when revenue shrinks. The plan still needs formal endorsement by governments and lawmakers.
“It’s wholly misconceived,” said Smith as the interdealer broker he runs posted a loss for 2012. “It takes away one of the planks of their safeguard against a downturn in revenues.”
Banks have already increased base salaries as a proportion of total compensation after European regulators, including those in France and the U.K., restricted when and in what form bankers can be paid after the financial crisis of 2008.
“We’re concerned about it,” Standard Chartered CEO Peter Sands told reporters on a call today as the bank reported full-year earnings. “We’re a global bank with 97 percent of staff outside the EU, and we’re concerned about our ability to be competitive in retaining talent and attracting talent.”
The City, as London’s main financial district is known, is the world’s top financial center, according to consulting firm Z/YenGroup Ltd., and is the European securities operations hub of firms including Deutsche Bank AG, UBS AG and Credit Suisse Group AG. About half of European investment-banking activity is conducted through London and the U.K.’s financial firms generated almost 12 percent of the country’s tax revenue from 2011 to 2012, according to TheCityUK, a bank lobbying group.