James Moore: The contract crackdown is just hot air

The FSA's oncern is the way in which people are paid and what they are paid for

So the Financial Services Authority is to get the power to rip up the contracts of bankers if they look like they offer too much financial encouragement to indulge in casino capitalism. It's going in the Queen's Speech and everything. "Look, look, voters, we're doing something about those dreadful bankers and their big bad bonuses."

Yes, the Government and its spin doctors have come up with yet another great way to generate some headlines with the aim of convincing the voters that New Labour is tough on bonuses, tough on the causes of bonuses in the run-up to the election. Is this the second or the third or the fourth weekend in a row something like this has leaked out?

It helps no end that the City has kept the pot boiling by appearing have fallen for it hook, line and sinker. So yesterday the ether was filled with loud denunciations of the Government's plans. Naturally, the British Bankers' Association was first out of the stalls, warning that such a measure will put British competitiveness at risk and (potentially) that "talent" might react by heading overseas.

Then there was Sir George Mathewson stepping up to the plate in the guise of "banking grandee" to warn about the "dangerous path" down which we will be travelling if legislation that would "interfere with the rule of law" were to be adopted.

You might just remember Sir George. He was the chairman of Royal Bank of Scotland until just before the financial crisis, and then worked for the hedge fund Tosca, which played an active role in the latter's disastrous takeover of ABN Amro.

Sir George really should have the grace to keep his counsel for his friends on the golf course. Most people would be forgiven for thinking "go get 'em, boys," when he suggests that an idea to squeeze bankers is a bad one. The same goes for the BBA these days, given its fondness for defending the indefensible.

But look a little more closely and you realise there's more spin than substance behind this wheeze. It may well find itself on the statute book, but whatever legislation results will probably end up like those daft laws from the Middle Ages that were technically enforceable for years but which no one in their right mind would have ever thought to use. These were the sort of laws that required every Englishman to keep 12 arrows sharp and true on pain of a weekend in the stocks, or which made it legal to shoot any Welshman venturing into Shropshire with one of them.

For a start, it's difficult to see how the regulator would be able to tell how a densely worded employment contract encouraged "undue risk taking" short of hiring a phalanx of employment lawyers at vast expense.

And the watchdog has, anyway, already told the banks that if they try to renege on agreements that demand payments are partially deferred, paid in shares and a subject to clawback, then they will regret it.

The signs are that (at least for the moment) this is a warning they are heeding after a few remarkably stupid incidences of "back to business as usual" emerged.

The idea may also be creating dangerous expectations about the FSA cracking down on the amount bankers are paid, which is really what bothers people. The watchdog can't really do much about that, and doesn't really want to. Its concern is the way in which people are paid and what they are paid for. So bankers are going to go on making a ridiculous amount of money, they just might have to wait a little longer to get their hands on it. This latest package of measures trailed by the Government will do little to change that.

And ultimately, quietly, some of the more ruthless banks might find that they are rather keen on the principle that they might be able to worm their way out of obligations that they have entered into, with the regulator's help. Because if that principle can be applied to the pinstriped whizzkids on the trading floors, it can also, very easily, be applied to the poorly paid individuals in the branches, who always seem to be the losers these days.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific