Published February 28, 2013
LONDON – London Mayor Boris Johnson lashed out at a European Union cap on bankers' bonuses on Thursday, warning that the move will shunt banking business away from the City of London and towards Zurich, Singapore and New York.
Bankers in Europe face a cap on bonuses as early as next year, following a provisional agreement in Brussels to introduce what would be the world's strictest pay curbs.
"People will wonder why we stay in the EU if it persists in such transparently self-defeating policies," Johnson said. "Brussels cannot control the global market for banking talent, Brussels cannot set pay for bankers around the world."
"The most this measure can hope to achieve is a boost for Zurich and Singapore and New York at the expense of a struggling EU," he said. "This is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman empire."
The provisional EU deal, announced by diplomats and officials after late-night talks between EU country representatives and the bloc's parliament, means bankers face an automatic bonus cap set at a par with their salaries.
Britain is unhappy with the plan and fears it could hurt London's position as one of the world's most powerful financial centers.
Prime Minister David Cameron indicated that Britain would review the provisional deal at an EU finance ministers' meeting next week in Brussels.
"We do have in the UK, and not every other European country has this, we have major international banks that are based in the UK but have branches and activities all over the world," Cameron said during a trip to Latvia.
"We need to make sure that regulation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding while being located in the UK. So we will look carefully at what the outcome of the negotiations was before working out the approach we will take at Ecofin (finance ministers' meeting) next week."
London is home to over one third of the global foreign exchange market and is by far the biggest financial centre in the EU, though its 144,000 banking staff have been castigated by voters and politicians for causing the 2008 financial crisis.
The bonus rules will apply to all banks - American, Asian, Russian or European - based in Europe, and to units of European banks located abroad, so a Deutsche Bank employee working in New York or Tokyo would be subject to the same limits.
(Additional reporting by Tim Castle, Writing by Guy Faulconbridge; editing by William Schomberg)