Bank of England Governor Mark Carney said he agrees with a U.K. parliamentary commission’s conclusions that the European Union’s proposed cap on banker bonuses is not the right way to control pay.
When asked at a hearing of the Parliament’s Treasury Committee in London today whether he agrees that a bonus cap may not be the right instrument, Carney said “absolutely.” He also told lawmakers that officials will be looking at deferral periods on pay for bankers as well as firms’ ability to claw back compensation if necessary.
The EU agreed last year on rules that would restrict bankers’ bonuses at twice their salary, a move lawmakers said would curb irresponsible risk-taking following the 2008 crisis. The European Banking Authority last month advised the European Commission to allow waivers to some staff earning more than 500,000 euros ($680,000) a year, three months after the U.K. government challenged the caps at the EU’s highest court.
Carney also said he had “no reason to disagree” with the Independent Commission on Banking’s conclusion that neither capping market share or balance-sheet size would result in substantial improvements to competition in U.K. retail banking.
“Just breaking up an institution doesn’t necessarily create a more intensive competitive structure,” he said. “It’s not just about one aspect. You need to look at the entire business model and risk profile.”
Opposition Labour Party leader Ed Miliband later this week will propose limiting U.K. banks’ market share, the Telegraph reported today, citing people familiar.