Outlook The reaction of the British Bankers' Association to proposed new rules from the Financial Services Authority on bonuses has been drearily predictable: yet another warning that the City's finest will flee the country if we police their pay more stringently than other jurisdictions.
Although we have been hearing this lament from the banking sector ever since the credit crisis began prompting greater regulation and new taxes, there has been no flight from London as yet.
In fact, remuneration experts say that what the FSA is proposing – the headlines are that 40 per cent of bonuses will have to be deferred for three years and that 50 per cent of the payment will have to be in the form of shares – is broadly in line with what potential competitor markets for financial services staff are planning. And like elsewhere, our rules will only apply to individuals whose activities might pose a risk to their firms.
However, even if the FSA was proposing to go further than others, it's worth remembering what the point of these rules is. This is not an attempt to limit bankers' pay – firms will continue to be free to pay bonuses of any size they want – motivated somehow by envy or revenge. Rather it an exercise in ensuring that traders and managers are not incentivised to take the sort of short-term risks that blew up so many institutions during the crisis.
Now, it may be that there are people in the City who resent having their trade fettered in this way. If so, we should not be sorry to see them to depart to rival employers in other jurisdictions. Let them run the risk of bringing down other people's banks rather than our own.