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 Salary & Bonus - European Banking Authority could risk financial stability with bonus cap
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European Banking Authority could risk financial stability with bonus cap

Professor John Thanassoulis believes the EU regulations capping individual bank bonuses will be damaging to financial stability. Instead Professor Thanassoulis argues the bonus cap should be applied at the aggregate bank level and that this small change will make banks safer and lower pay in the whole sector.

He proposes that a cap on total remuneration for investment bankers in proportion to an investment bank’s risk-weighted assets is the best way to tackle the issue of bankers’ bonuses while delivering financial stability.

The European Banking Authority’s (EBA) decision to declare that almost all ‘role-based remuneration’ are essentially bonuses has caused consternation and Professor Thanassoulis argues it is too blunt an instrument which will make banks less financially stable.

Professor Thanassoulis said: