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New plan for transparency in banker bonuses

Stephen Beard Dec 28, 2010

New plan for transparency in banker bonuses

Stephen Beard Dec 28, 2010


STACEY VANEK SMITH: There’s a new plan in the news this morning that would force banks to reveal how big banker bonuses are, and why.

Our own Stephen Beard joins us live to talk about this. Good morning, Stephen.

STEPHEN BEARD: Hello Stacey.

VANEK SMITH: Stephen, we’ve heard all sorts of plans to rein in bank bonuses. Where’s this one coming from?

BEARD: That’s right. We’ve had British and European regulations. This plan is part of the so called Basel III set of planned banking regulations. If adopted, these will affect all of the big banking countries that have signed up to it, including the the U.S.

VANEK SMITH: And what’s different about this approach?

BEARD: This aims to use disclosure to bring some disipline to the payment of bonuses. So it’ll mean that banks have to name which bankers are getting how much, and what they’ve done to earn it. So this isn’t bureaucrats restricting bonuses, this leaves it to the market, to the bank’s shareholders for example to judge whether the bonuses are reasonable and it leaves it to the markets generally to judge which banks have the most prudent bonus policies.

VANEK SMITH: Is the thought that disclosure would cut the size of the big bonuses bankers are getting?

BEARD: Not according to a British banking expert, Raph Silva that I’ve been talking to. He thinks it may now be easier for the top performing investment bankers to collect big bonuses.

RALPH SILVA: If you actually see in a report card that a banker makes $100 million, and he gets a $5 million bonus, all of a sudden, this seems like it reasonable the amount of money. In other words, if you sell more shoes in a shoe store and you make more money because you’re on commission, that’s OK.

He says the bankers who aren’t bringing in more business and those who are actually loosing money will suffer. They’ll rpobably lose their bonses under this plan.

VANEK SMITH: Stephen Beard in London, thank you!

BEARD: OK Stacey.

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