The EU cap on bonuses was misnamed; it merely capped bonuses as a ratio of fixed pay, leading banks to raise salaries instead, a strategy openly acknowledged by bank executives.
The removal of the bonus cap in the UK allows banks, like Barclays, to offer bonuses up to 10 times salaries, yet complexities remain regarding overall pay equality among employees.
The policy was largely seen as a superficial move by Brussels, failing to address the real factors contributing to the financial crisis and banks’ short-term risk-taking behavior.
Executive directors at banks should see a reduction in regular salaries if bonuses increase; aligning compensation in a way that fosters responsible banking rather than exorbitant payouts is critical.
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