BETA filters Key Events (3) The Financial Times spoke to Goldman Sachs International boss Richard Gnodde, who claimed that removing the bonus cap would “definitely make London a more attractive place”. The argument seems to center on the fact that banks have had to raise wages to attract talented staff instead of bonuses, and that it is harder to cut a banker’s salary during tougher years. However, a bonus can be completely canceled, making it the most attractive lever for rewarding employees. Richard Gnodde, International CEO of Goldman Sachs, has backed the possible abolition of bankers’ bonuses in the UK. Photo: Reuters Gnodde said that, with the current system: If I move a senior person between New York and London, I increase the fixed costs of our operations If that rule doesn’t exist, I don’t have to think about it. Updated at 08.55 BST Adding to what is proving to be a heated debate, Mick McAteer, a former board member of the City regulator the Financial Conduct Authority, warned that scrapping the banker bonus cap is a “bad idea” and could encourage risk-taking. Interesting debate on @BBCr4today about the Government’s scrapping of bankers’ bonus capital. There are several reasons why this is a bad idea. It will encourage the type of aggressive, risky socially useless market behavior that we really don’t need. 1/ — Mick McAteer (@MickMcAteer) September 15, 2022 A finance official told Today that other regulatory measures could limit the damage caused by removing the bonus cap. Not really. Even if individual companies believe they are behaving what matters is the overall impact on the system. Removing the cap would encourage intense competition and create huge risks. 2/ — Mick McAteer (@MickMcAteer) September 15, 2022 I’m not sure it’s been appreciated how dangerous tough competition can be. It not only has destabilizing effects on the market, but creates incentives for institutional production and misappropriation of toxic socially useless financial products e.g. pension funds 3/ — Mick McAteer (@MickMcAteer) September 15, 2022 In addition, the removal of the bonus cap comes at a time when the government intends to force regulators to defend the city’s interests, to promote “growth and competitiveness”. Thus, further increasing pressure to expand dangerous activities, the sale of toxic products. 4/ — Mick McAteer (@MickMcAteer) September 15, 2022 And if that’s not bad enough, it appears the government is planning to give itself “call in” powers to override regulators’ decisions. So much room for city lobbyists to get what they want. Regulatory independence under serious threat from political expediency/industry lobbying now. 5/ — Mick McAteer (@MickMcAteer) September 15, 2022 The government already appears to be considering easing bank capital requirements after pushing the BoE/PRA to weaken the crucial Solvency II insurance regulations. And what does removing the leveling bonus cap mean? Why give London a further rocket boost? 6/ — Mick McAteer (@MickMcAteer) September 15, 2022 Shares in Shell rose almost 0.8% after the departure and replacement of Ben van Beurden was confirmed this morning. Shell shares rose after the company’s new chief executive was confirmed. Photo: Reuters
Relatively steady open for European markets
We don’t see much movement from European stocks this morning, which are mixed but relatively flat. Here’s how the major indices start Thursday’s session:
Shell appoints Wael Sawan as its new CEO
Mark Sweney Shell has appointed Wael Sawan, a 25-year company veteran, to succeed Ben van Beurden, the company’s longtime chief executive. Sawan will replace Ben van Beurden, Shell’s boss for almost a decade, who will step down at the end of this year. Reports of Van Beurden’s planned departure emerged earlier this month and Sawan was tipped to take over the top job. As the current head of Shell’s integrated gas and renewables division, Sawan oversees its push into low-carbon energy as well as its giant natural gas business. Sawan, born in Beirut and a dual citizen of Lebanon and Canada, will officially take over as CEO from January 1 when he will join Shell’s board of directors. Van Beurden, 64, who has worked at Shell for nearly four decades, will continue to work in an advisory role on the board until the end of June. Shell CEO van Beurden will be replaced by Wael Sawan. Photo: Benoît Tessier/Reuters Shell chairman Sir Andrew Mackenzie said: Ben can look back with great pride on an outstanding 39-year career at Shell, culminating in nine years as outstanding CEO. It leaves a financially strong and profitable company with a strong balance sheet, very strong cash generation capacity and an exciting set of options for growth. Read more here:
Introduction: Banker bonus cap on chopping block
Good morning and welcome to our rolling coverage of business, the global economy and financial markets. Bankers’ pay is back in the spotlight this morning after reports emerged that Chancellor Kwasi Kwarteng is considering lifting a bonus cap as part of the government’s wide-ranging post-Brexit reforms. The cap was part of the EU’s response to the 2008 financial crisis and means that year-end bonuses are currently capped at twice their annual salary. But these EU rules are now likely to be scrapped eight years after they were introduced. The Financial Times, which first reported the news, said the controversial move was part of the government’s plans to boost the City’s global competitiveness and make the UK a more attractive place for banks. Bankers’ bonuses could be scrapped under changes to be introduced by Liz Truss’ new government. Photo: Andy Rain/EPA Remember that the government also plans to controversially reinstate “competitiveness” as a secondary objective for UK regulators through the Financial Services and Markets Bill, which is due to head to committee. Although economists and former politicians have warned that it is an inappropriate return to pre-crisis conditions. Critics are likely to make the same argument about removing the bonus cap. It all appears to be part of the government’s wider strategy to put growth at the heart of every decision-making and generally to attract more businesses, stock exchanges and start-ups to London. But lifting the cap could prove widely controversial at a time when households are struggling to make ends meet amid a cost-of-living crisis, even with the government’s £150bn support package for energy bills on the horizon. We’ll bring you more discussion and analysis as soon as we get it.
