Lord Myners appears to be making a bad situation worse. Fresh from last week's news that the UK has slipped to third place behind New York and Singapore as the place where investors would prefer to do business, and following closely on from concerns that a two tier pay structure is emerging in which New York-based bankers will receive larger bonuses over a shorter space of time than their counterparts in the City, this doesn't seem a propitious moment to boast that, the UK is taking a tougher line on banking compensation than, "anywhere [else] in the world."
Specifically, Myners said yesterday:
"We are not only at the cutting edge of the G20 and the EU but are setting higher standards and are continuing to bear down on dangerous and unjustifiable elements of the bonus structure."
UKFI has banned cash bonuses for anyone earning above 39k at RBS and Lloyds. This sounds unduly draconian: Kenneth Feinberg, the US pay czar has imposed what appear to be more limited restrictions in the US, stating that salaries must be limited to 300k for only the top 25 senior executives at the biggest recipients of TARP money. Earlier, the US government said bonuses for the top 25 must be restricted to 33%% of salaries, payable entirely in stock.
Naturally, there are ways to evade the restrictions in the UK: RBS could always increase salaries substantially; or - as RBS staff appear to be anticipating, it could pay bonuses in notes which are not technically cash, but which are immediately convertible into cash.
However, in global terms, the compensation regulation game is all about perception. In the US, Timothy Geithner has been careful not to depart from globally agreed norms; Geithner is aware that to do so could damage the position of Wall Street globally.
Therefore, while the UK has gone so far as to oblige all banks in the City to sign up to rules agreeing to postpone 40-60% of bonuses over three years (and is rumoured to coerced some international houses into cooperating with the threat of bad publicity), the US has restricted itself to comparatively feeble exhortations for banks to avoid pay structures that promote excessive risk taking.
Myners is being driven by moral and political considerations. RBS has eclipsed Citigroup as the biggest banking bailout in the world. He is right to claim that the bank was monumentally badly managed, and it is right that anyone responsible for the decisions that led to this situation deserves little or nothing.
However, Myners is wrong to highlight the exceptionally draconian treatment being meted out to bankers in the City. In the perceptions game, this is an own goal. London is reliant on an international workforce - the City of London estimates that 40% of financial services staff are overseas nationals. If the UK government is perceived to be more ferocious than its global peers, those people will do their best to go somewhere more accommodating instead.