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Bob Moon: International regulators have drawn up a plan of attack on bank bonuses. They’re aiming to shine a sort of “spotlight of shame” on executives who keep paying themselves like the economic disaster never happened. If the draft proposal is adopted, banks in the U.S., Europe and elsewhere would have to disclose how much they’re paying top staff — and why.
From London, Marketplace’s Stephen Beard reports.
Stephen Beard: There’s nothing new about banks revealing how much they’re paying out in bonuses. But this plan — from the international Basel committee of regulators — goes somewhat further. Banking analyst Ralph Silva:
Ralph Silva: What’s unique about this particular regulation is that they’re not required just to announce how much money they’re paying, they have to announce how much money they’re paying to whom. And that’s a stretch we’ve never seen before from a regulatory point of point of view.
Under the plan, banks would have spell out why individual bankers deserved their bonus. The idea? That markets will then police the payouts. Investors will dump the shares of banks perceived as doling out too much and encouraging staff to take too many risks. Peter Hann is a former investment banker who advises Britain’s financial regulator. He thinks this much disclosure could backfire.
Peter Hahn: I’m not sure if it doesn’t have reverse effect where somebody says, ‘Wait a second, those guys pay more, why shouldn’t I move to that bank?’
Too much transparency, he says, might actually lead to banks vying with each other to pay even bigger bonuses. Analyst Ralph Silva says he certainly doesn’t believe the Basel plan will lead to lower pay for bankers.
Silva: Unfortunately the problem with the banking industry is that there’s simply not enough people in the world with the skill sets required to do banking. The problem is a long-term problem. We need to educate more people with these skills.
Creating more bankers may not be to everyone’s taste and any way will take time. The Basel plan — if adopted — could be implemented within months.
In London, this is Stephen Beard for Marketplace.
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