BBC BLOGS - Peston's Picks
« Previous | Main | Next »

Crackdown on hedge fund pay

Robert Peston | 18:38 UK time, Wednesday, 30 June 2010

I have learned that the bonuses paid to senior executives at hedge funds and fund managers are to be subject to strict conditions, under new EU-wide rules that have been agreed by EU members states and legislators.

Gherkin building and Canary WharfThis is the first time that there would be any regulation of the pay of hedge fund managers operating in the City of London. There is a strong probability that it will encourage some of them to relocate outside the EU, to financial centres such as Geneva in Switzerland.

I have spoken to a number of senior hedge fund managers, who are shocked their pay is to be regulated. They say that it is "unenforceable" because they will quit the EU.

The new conditions imposed on bonuses paid at hedge funds and other fund managers stem from amendments agreed to the Capital Requirements Directive.

The directive's stipulation on bonuses apply to some 2,500 European Union big investment firms, as well as banks.

Under the new rules, agreed by member states and legislators, only 30% of any bonus for bankers and fund managers could be paid straightaway in cash - and the proportion would fall to a fifth for large bonuses.

At least half of the total bonus would have to be payable in shares or securities linked to the resilience of the institution - and much of the bonus would have to be deferred, with individual countries able to decide how much of the payment should be staggered.

The new rules won't make a big difference to bankers based in London. The Financial Services Authority has already imposed conditions on them which many bankers would see as tougher.

But the rules will have a big impact on hedge funds and other asset management firms.

The FSA is miffed that it will be forced to regulate the pay of these so-called investment firms. It does not believe that the way they are paid contributed to the financial crisis.

It is understood that the Treasury felt powerless to block the reform, which will apply from the end of this year.

The Treasury feels that in general the provisions of the Capital Requirements Directive - which, as its name implies, mainly covers the capital requirements of firms - very much suit the UK's interests.

The rules on the regulation of bonuses go a bit further than the Treasury would have liked, said a source, but it is hopeful that the FSA will implement the rules in a "proportionate" way.

UPDATE 01 July 18:36

Those hedge funds that are not covered by the Capital Requirements Directive (CRD) will face almost identical constraints on their variable pay, under the planned Alternative Investment Fund Managers Directive (AIFM Directive).

According to regulatory sources, the remuneration clauses of the two directives will be "aligned".

So although only a limited number of hedge funds are covered by the CRD, the rest will be swept up in the AIFM Directive's net.

Comments

Page 1 of 3

  • Comment number 1.

    As most criminals relocate when the heat is on, this would be seen as a get-away after robbing the treasury as much as a threatened relocation. Cayman Islands is a prime location for such ponzi schemes so they have places to go. Efforts to protect the public are always viewed with distain by the bankers as they do not feel they are getting their money's worth from the politicians they have bought. The bankers insist that their gambling habits be funded by the public while insisting that Private enterprise is sacrosanct. They need the bonuses to purchase the properties cheap of those who are losing their homes because of their previous gambling. It is all basic Capitalism.

  • Comment number 2.

    > senior hedge fund managers ... say that it is "unenforceable"
    > because they will quit the EU.

    I think John McClane might have said "yippie kay ey" in response to
    that sort of rubbish. I prefer "diddums", personally.

  • Comment number 3.

    There are dangerous precedents here. The government should have no say in the earning of private individuals, or in private contracts voluntarily entered into by individuals or private companies. That is the road to totalitarianism.

    If what we are actually saying is that the way that they make their money is immoral, then change rules. Ban naked short selling. Put position limits on each market.

    I am also concerned that people are celebrating the exiting of Britain of wealthy people. If they all leave because of the grasping hands of socialists, who will be left?

    Am I the only person here who finds the dictating to an individual, how much they can earn, troubling?

  • Comment number 4.

    Given the size and power of the EU why doesn't it simply "persuade" the Swiss not to provide such a option in Europe. After that it's simply a trade off for the hedge funds between cash now, or, living in European environment. The vast majority of these highly paid people also have a family who may not want to be uprooted to, you assume, Dubai. Any that did probably went a few years ago.

  • Comment number 5.

    golly gosh... popping off overseas eh? How will we cope without them!

  • Comment number 6.

    3. At 7:49pm on 30 Jun 2010, truths33k3r wrote:

    "I am also concerned that people are celebrating the exiting of Britain of wealthy people."

    I'm sorry truth33k3r... but aren't we talking about the very people who by their gambling made us all a lot poorer, while lining their own pockets? Is there any chance that they are going to dip into their off shore accounts and give any of it back? I don't think so!
    I'll be at their private airstrip to way them off...

  • Comment number 7.

    Those who live in glass houses....

    Let's hear how much the BBC executives, "stars" and commentators earn first - all paid for from taxation (the licence tax may not be general taxation, but it is taxation all the same).

    It is a disgraceful and illegal use of public money largely for party political purposes - overpaid, undertalented Labour stooges infest the Beeb.

  • Comment number 8.

    The sad thing is that forces outside this country are hitting at people who pay a huge amount of Tax to our Treasury.....died in the wool socialists & those who envy anyone luckier than themselves will welcome these guys going, but are THEY going to make up the shortfall to the Treasury? The guys who go abroad will still be making the money & paying (less) tax to another country - is this really what we are trying to achieve.

    On a less hysterical matter, can someone explain how 'bankers' & their like are going to be paid the portion of their bonuses that is paid in shares if they work for a private company that has no marketable securities - eg Rothschilds, Lazards or, say, a Middle Eastern or Russian institution that has no publically quoted securities?

  • Comment number 9.

    thruth33:

    When most individuals or companies go bankrupt their future earning and properties are attached to pay off the accumulated debt to their creditors. Banks have unloaded all their bad paper on the taxpayers and the governments are letting them walk away with no obligations to pay any portion of the debt they created. Normally I would not support capping of pay but I would support the banks repaying the debt the generous governments have assumed in the name of the taxpayers. Such repayment would certainly impact the amount of funds available for a bonus plan and you should remember that it was the bonus structure that fueled the incentives to create the bad loans to begin with. Now if you would like a repeat performance it appears the bankers are more than willing to create another bubble and pass the debt along to the taxpayers again. Another argument would be if it is good policy to limit the theft by pirates.

  • Comment number 10.

    3. At 7:49pm on 30 Jun 2010, truths33k3r wrote:
    There are dangerous precedents here. The government should have no say in the earning of private individuals, or in private contracts voluntarily entered into by individuals or private companies. That is the road to totalitarianism.

    If what we are actually saying is that the way that they make their money is immoral, then change rules. Ban naked short selling. Put position limits on each market.

    I am also concerned that people are celebrating the exiting of Britain of wealthy people. If they all leave because of the grasping hands of socialists, who will be left?

    Am I the only person here who finds the dictating to an individual, how much they can earn, troubling?
    >>>>>>

    Actually, from reading the article, the implication is that although big bonuses are still on the cards, a large proportion will be in shares of the firm/fund that is paying the bonus. This seems like good sense to me since it ties a proportion of the wealth of that individual to the state of the firm that paid the bonus. It no longer rewards short termism unlike if it was paid in cash.

    This could be a good model for all bonus schemes and I don't really see it as a step on the road to totalitarianism.

  • Comment number 11.

    6 - The bankers have been able to achieve the theft from the people with the help of government, not in spite of them.

    If government are going to arbitrarily confiscate wealth from whoever they deem to have made to much who would start a company here? Who would keep their company here? Sounds like the end of Atlas Shrugged to me.

  • Comment number 12.

    11. At 8:25pm on 30 Jun 2010, truths33k3r wrote:
    6 - The bankers have been able to achieve the theft from the people with the help of government, not in spite of them.

    If government are going to arbitrarily confiscate wealth from whoever they deem to have made to much who would start a company here? Who would keep their company here? Sounds like the end of Atlas Shrugged to me.
    >>>>>

    As previously noted, the government will not arbitrarily confiscate wealth but it will insist it is tied in to the source of that wealth - this will hit the boost and run brigade.

    As for them using their wealth to start companies - I am doubtful it is a massive source of funding for start ups - probably used more for the luxuries.

  • Comment number 13.

    Ask them to be sure to close the door on their way out.....

    I hope they like cheese....

  • Comment number 14.

    11. At 8:25pm on 30 Jun 2010, truths33k3r wrote:
    "6 - The bankers have been able to achieve the theft from the people with the help of government, not in spite of them. "

    I agree that the state makes the rules, the bankers just play by them, and your point 3. about needing to change the rules is well made. However aren't pay structures just one of the rules, which in this case encouraged the short term risk taking?

    In any case, I don't see why we should welcome the thief, even if he is "just playing by the rules Gov".

  • Comment number 15.

    Hedge funds are a parasitic "externality" on the real economy. Tax them heavily in the same way harmful products such as petrol, tobbacco, alcohol etc have a surcharge to help pay for their anti social effects

  • Comment number 16.

    9 Ghostof - none of this would be being debated if the insolvent banks had been allowed to fail. More government incompetence and meddling with the market.

    10 - Emkay - it is the principle of interfering in a private company by government that I am concerned about, not the detail of this case. If this goes without comment from the people then more and more things will come under the remit of a government bureaucrat to decide upon.

    12 - It was not hedge fund bankers that I was referring to in terms of starting a business. I mean anybody. People lambast James Dyson for moving production abroad, accusing him of unpatriotic greed, but very few ask themselves whether high taxes and endless government regulations might be a contributing factor as to why we do't make much any more.

    We are not going to get out of this by borrowing ourselves rich and selling each other houses, burgers and insurance policies. In my view government is the problem not the solution.

  • Comment number 17.

    There's a distinction to be made between 'bankers' and 'Hedge Fund Managers'..As far as I'm aware no Hedge Funds have been bailed out or received taxpayers funds to tide them over the crisis. Surely these are autonomous private enterprises whose main sin as far as the authorities are concerned is that their assets are out of reach of the grasping HRMC. The fact that they are quite happy to bet against CEO's and Governments who aren't up to the job doesn't endear them to the authorities either but as noted above, as long as you can trade options contracts to sell shares/bonds you don't own then you would be a mug not to take advantage of that.
    Its the rules of the game that need looking at, not the people who play it..

  • Comment number 18.

    @ 3. At 7:49pm on 30 Jun 2010, truths33k3r wrote:

    > The government should have no say in the earning of private individuals

    Nonsense. We call them the government because they govern things like that.

    > I am also concerned that people are celebrating the exiting
    > of Britain of wealthy people.

    Would you prefer "yippie kay ey" or "diddums"?

    > If they all leave because of the grasping hands of socialists,
    > who will be left?

    Around 59 million, so I'm told.

  • Comment number 19.

    14 - We should not blame the bankers for taking every penny they could if the government let / assisted them. That is what bankers do. It is like blaming the fox for killing the hens. The fault lies firmly with government for allowing the bubble to blow up and for then creating the mother of all moral hazards by bailing the bankers and the rich out, with the hard earned money of the people, and that of their children.

    If we do not assign blame to the correct party we cannot begin to fix the system so that it cannot happen again.

  • Comment number 20.

    When ever nosey, interfering bureaucrats have to meddle in something which they need to control...simply as some sort of power trip...such interference is ALWAYS referred to as a "crackdown" - is this the latest meaningless buzzword along with the likes of "blue sky thinking"?

  • Comment number 21.

    @ 3. At 7:49pm on 30 Jun 2010, truths33k3r wrote:

    > Am I the only person here who finds the dictating to an
    > individual, how much they can earn, troubling?

    Let's be reasonable. If they lived in some far off
    land, I wouldn't care. But these high wages affect
    prices, so we have to cut them.

    If they make a lot of money, why shouldn't
    the firemen, police, and the private sector workers
    strike to force more money out of customers? If mere spivs
    can make a bundle, why not people who do real, essential work?

  • Comment number 22.

    Bankers own the governments, I think that should be clear to all by this time. The governments decided that the public should pay for the sins of the bankers and the bankers realized that there was more to be stolen from the tresuries and have proceded to continue with the theft. The US Senate passed new banking regulations and those anti-big government, anti-tax Republicans had the tax on the banks removed and the costs of the new regulation passed on to the taxpayers..hypocrits and prostitutes...I apologize to the prostitutes for putting them in the company of elected officials although they are probably often in the company of elected officials. The bankers having robbed the people and the governments are offended that efforts are being made to take away their guns. Because of political protection they are only assumed felons.

  • Comment number 23.

    truths33kr said:

    'very few ask themselves whether high taxes and endless government regulations might be a contributing factor as to why we do't make much any more.'

    Those of us that do ask it find ourselves asking another question - why does the private sector keep on doing things that need regulation to stop them, and why do they fail to do the things that taxes are needed to pay for?

    If your response is 'they would if it wasn't for the government' then I would say firstly that your history is off-beam, and secondly the Tory-LibDems are about to conduct a big experiment to show once and for all whether this is true!

  • Comment number 24.

    What we need and deserve is smarter Govt. that doesn't react for short term political gain. Until then the public will believe that well paid individuals are the bad guys and that they were bailed out with taxpayers money - even if no Hedge Fund ever was.

  • Comment number 25.

    There's a distinct lack of understanding about banks. Thousands work in the banking industry in this country, mostly low paid, myself included. For most of my career, I have earnt less than the tube and railway drivers that blight my way to work.

    Now, after 13 years of long days in the office, I am just about able to tackle some of my debts. However, a very small number of high earning bankers have destroyed the reputation of the banks and so we are all tarnished. Now in order to earn the bonus (which is paid largely in lieu of overtime) I have to pledge my future to a bank, on which by and large my performance barely impacts due to the junior nature of my role, in order to receive my full bonus after a number of years. That allows them to mistreat me if they like, knowing full well that they do not have to pay me if I leave. How is that fair? Labour grabbed on to the banking crisis and whipped up media support and frenzy to prop up their failing government. Now we have ill-thought out policies to try to address that, which harm the low-paid whilst the ones whom it is designed to address will just find another loophole. Nothing more than media candy.

    How about the railway companies, utility companies, NHS bosses, civil servants that make all our lives a misery and yet get paid mega-bonuses? How about fairness for ALL? I would not mind if this applied to everyone in the country but to single out my profession is tantamount to restricting my freedom to work.

  • Comment number 26.

    Wouldn't it be better if the EU set a maximum pay for anyone in the EU - to include Footballers and BBC 'Stars' too!!!!!! and not just bankers and hedge funds managers?

    I feel sure that if the rest of us got to vote on this a majority would vote for it!!!!!

  • Comment number 27.

    23 -

    'Those of us that do ask it find ourselves asking another question - why does the private sector keep on doing things that need regulation to stop them, and why do they fail to do the things that taxes are needed to pay for? '

    The banking crisis occurred despite endless regulation. The biggest regulation is self regulation. If I know that if I take a huge gamble and it does not pay off then I will lose my money. If however, I know that if I lose the government will give me some other suckers money - well then I will bet the farm.

    The private sector could provide all services that we currently have been led to believe that only the government should provide. There are questions about services given freely to the poor, but your standpoint that only the government can provide things such as healthcare appears to come from an idealogical, rather than a practical standpoint.

  • Comment number 28.

    This will be more than a crackdown on hedge fund pay.
    European lawmakers plan to release the final draft of what is being called:
    “Alternative Investment Fund Management Directive”.
    This will limit borrowing by hedge funds and private-equity firms. The rules will also restrict European investors’ access to hedge funds based outside the 27-nation nation bloc. In other words, there is a definite attempt to keep bad stuff out and regulated stuff in.
    French President Nicolas Sarkozy and German Chancellor Angela Merkel requested that Europe speed up financial reforms to block speculation; both said that some bets against stocks and government bonds should be banned.
    Germany last month banned some naked short-selling (betting against a security without ever being in possession of it).
    Changes in regulation, such as Germany’s restriction on betting against sovereign debt, are disruptive to hedge funds. Well, all I can say to that is “too bad”! Go do your gambling some place else.
    There seems now to be less concern that European governments will repay their sovereign debts than with the more threatening "risk" that Brussels will change the more rules.
    Many hedge-fund managers are starting “Ucits”, funds known by the acronym for Undertakings for Collective Investment in Transferable Securities, because the regulatory framework is more stable. Right now,
    a) I don’t know much abhout Ucits and
    b) Ucits at least have the regulators approval.
    In follow-up, Commission has adopted a proposal for a re-examination of the 1985 UCITS Directive. The changes proposed by the Commission will simplify the UCITS Directive in order to ensure that investors receive useful cost and performance disclosures when selecting funds. The White Paper also identified areas where further investigation by the Commission is needed.
    European politicians aren’t alone in stepping up regulations. US lawmakers are proposing that hedge funds that manage more than $100 million must register with the Securities and Exchange Commission, subjecting them to audits; they will also have to provide information on trades so authorities can assess systemic risk.
    The regulatory changes show policy makers are realizing what caused the financial meltdown. I’d say the next step is to ban speculation, or least seperate it entirely from regular banking.
    Wonderful progress!

  • Comment number 29.

    I would like to know why a comment here advertises Dysons but when I mention a bad company by name it is not allowed. The are many mentions of bad bankers and hedge fund managers, what about bad managing directors as well as bad media coverage not to mention bad MPs and solicitors who put charges up twice a year hence get a pay rise twice a year. Many of these people hold high positions but none have had pay cuts but according to many comments their employees have. It seems hedge fund managers have had a wonderful life but do not want to tighten their belts like some of us have had to for some time.

  • Comment number 30.

    No doubt the socialists are cheering to the rafters. The same uneducated comments made here as are repeated virtually everywhere you look, with some honourable exceptions (truths33k3r etc).

    It saddens me that so few people realise that the financial services industry is what keeps (and has kept) Britain from bankruptcy. "Tax them all to hell" would seem to be the populist chant....and when those firms and individuals leave (as they will, if this continues) who else will pay the massive amount of taxes required to right our economy? The self righteous "man in the street"? The same one who speculated on the value of his house for the last ten years, whose family recklessly spent beyond their means the past decade and yet who wants to indignantly point at the corporate world?

    I think not.

    We don't make anything in this country anymore. We are wholly uncompetitive in most industries. Asia is full of individuals who are better educated, better motivated, better skilled AND willing to do their jobs for a fraction of the same cost than a complacent Brit or American. We no longer pay our way in the world....and the situation is only going to get worse.

    So who will pay all those taxes needed in the future to meet the expectations of our complacent society? Our mass unemployed? I think not.

    Continue to harangue everyone in the financial services sector...and watch our poverty increase.

  • Comment number 31.

    Governments have no business interfering in how much people are paid in a private enterprise.

    The markets didn't fail, they weren't allowed to work.

    Banks, GM etc. were rescued by spineless politicians too frightened to let failed businesses go bankrupt.

    Now the politicians want to appear 'tough' to get themselves votes. Whether it's Banks, BP (in Obamas case) it is all empty rhetoric.

    Still, doesn't bother me. I've made a bit of money buying RBS shares cheap and selling them when they went up. After all it's my tax money propping them up, figure I might as well get some back.

    But if the nasty banks/BP/evil-capitalist-of-your-choice upset you so much then go and live in the Marxist paradise of.... oh, wait a minute, it didn't work did it, that Communism thing they tried? After all, there weren't exactly thousands of people trying to get IN to the Soviet Union, Cuba, China.

  • Comment number 32.

    Why do politicians expect the same type of asset boom to be repeated? If you look at the history of economic ups and downs each time the boom is different. The only thing booms have in common is that nobody of any importance wants to acknowledge the existence of a boom as they are enjoying the loose money do much and believe the boom can last forever (no more boom and bust). The following recession is therefore deep because because they do not react to control a boom by raising interest rates. The pattern is to let a boom reach a disastrous stage and only recognise it when we are nosediving into recession.
    My bet is the next uncontrollable boom will be based on areas where there is no regulation.

  • Comment number 33.

    Justnotfair

    'How about the railway companies, utility companies, NHS bosses, civil servants that make all our lives a misery and yet get paid mega-bonuses?'

    Well, for a start they only manage to get these 'mega-bonuses' by convincing people that they are 'worth' the same as private-sector CEOs! Lots of them have been recruited from there anyway.

    And what do you mean they are making lives a misery? By running these organisations at all, or by running them badly? If the latter, are you proposing to pay them less? If you think they would do just as good a job on a quarter the salary perhaps this would apply to bankers and hedge fund managers too?

    This would leave more money to pay the actual workers like yourself, without forcing you to accept what sounds pretty close to middle-class slavery.

    You want things to be better? It starts with reform in the private sector. See http://www.diarmidweirphotography.co.uk/wealth_without_money/2009/11/rover-the-%E2%80%98phoenix-four%E2%80%99-and-limited-liability

  • Comment number 34.

    Well , i see no point in this half baked idea at all, either hedge funds are bad and should be heavily regulated, or they are not and what they pay their employees is no ones business but their own.

    If they move perhaps the next move will be to limit access to EU markets for non EU companies.Whatever is done i cant see how it does anything other than create more problems rather than solves any.

  • Comment number 35.

    27. truth33k3r

    There was nothing remotely ideological about my comment. I suggested you 1) look at history and 2) await the Tory-LibDem experiment.

    You claimed:

    'The biggest regulation is self regulation.'

    Even the 'objectivist' Alan Greenspan doesn't believe this any more.

    'The private sector could provide all services that we currently have been led to believe that only the government should provide.'

    Like healthcare - as in the US? And you want private police forces, or what exactly?

    I think you saw my comment through your own blinkers.

  • Comment number 36.

    30. At 9:32pm on 30 Jun 2010, jontymo wrote:
    "It saddens me that so few people realise that the financial services industry is what keeps (and has kept) Britain from bankruptcy. "

    You must be kidding!!! The financial service industry? keeping us from bankruptcy??? Hah hah hah

  • Comment number 37.

    #30 jontymo

    You really don't get it do you. It's because the financial sector behaves as it does that we don't make much here anymore. If we are as bad at making things and so expensive and so incompetent then can you explain why it is that almost the entire automotive sector is now foreign owned but still here! Can you also explain why it looks as if two of those companies intend building their latest generation cars here.

    The problem really is that the financial sector is managed by people that are self centred and strategically inept. Most of them have no understanding of either technology or markets and couldn't care less about them anyway. Their arrogance is astounding.

    Personally I'd tax them on the basis of their support for the rest of UK Plc. How much they invest in start-ups and early stage companies and how much they help to grow the new generation of companies to rebalance the economy.

    If they don't start doing this enthusiastically then why on earth shoudl we support them?

  • Comment number 38.

    37 - your comments prove your standpoint. I am not going to change it, but don't pretend that you are not a statist.

  • Comment number 39.

    30. jontymo

    Isn't your comment a bit contradictory?

    I mean if 'Asia is full of individuals who are better educated, better motivated, better skilled AND willing to do their jobs for a fraction of the same cost than a complacent Brit or American.' why aren't they working in the wonderful 'financial services industry'?

    Perhaps it's because they (and their leaders) know most 'financial services' are really just an unproductive scam? Perhaps instead of being 'what keeps (and has kept) Britain from bankruptcy.' they are really the cause of all the trouble?

    As for paying taxes - if the govt pays the money into the economy it can take it out again - no probs. It's just a question of who it takes it from! See http://www.diarmidweirphotography.co.uk/wealth_without_money/2010/03/debt-and-deficits-sustainable-but-unfair

  • Comment number 40.

    This misses the point on many levels.

    Hedge funds didn't cause the credit crisis, over leverage of banking institutions, which was exposed when confidence started to leave the structured credit markets did.

    Almost a century ago, investment banks were run as hedge funds are now, as small, privately owned partnerships. This provided a natural limit on the scale of their businesses. They took less risk, as over extension would wipe the firm out. There was now TBTF status. This additional business risk the partners took was rewarded with profits if the business went well. Many forget that capitalism is as much about punishing failure as it is about rewarding success and the state guarantees, implied or explicit of TBTF banks highlights that they should never have been allowed to become so big, with over leveraged, bloated balance sheets.

    This was endorsed by noted Bank of England economists Andrew Haldane and Piergiorgio Alessandri as recently as Nov. 2009.

    Hedge funds make an easy target because they can be accused of anything a politician wishes because they never answer back. Running a capital markets business isn't easy. For every success, there are around 50 failures. The fact that so many people, motivate by an apparent combination of jealousy and ignorance of traded products, seem to relish the damage being done to one of the last things the UK does well and profitably is shocking.

    Controlling how much anyone can earn removes the incentives implicit in capitalism and shifts us closer to the broken socialist economics models seen in Europe, where effective tax rates exceed 50%.

    If you are a partner of a business that made billions in a year, you are entitled to a share of that profit, regardless of the industry in it operates.

  • Comment number 41.

    39. truths33kr

    I assume your comment was aimed toward me.

    My comments don't prove anything. I'm only asking questions. You are the one making the as yet unsubstantiated claims. Can you substantiate any of them?

    'don't pretend that you are not a statist.'

    What's a 'statist'? Don't you like states? Or do you just think they shouldn't be allowed to do anything to stop some growing rich at the expense of others?

  • Comment number 42.

    Hold on a moment. They will be paid _only_ 30%... So what would stop them agree on three times bonuses, and carry on as before. Then next year, they agree with the board that the criteria to pay the remaining 70% has not been met and cancel it. But in the mean time set new criteria for the next bonus according to which this year 3xbonus will be paid 30% no problem and so on...
    It has to be an absolute limit on the bonus not (only) a relative one, surely!
    Am I missing something here?

  • Comment number 43.

    @ 30. At 9:32pm on 30 Jun 2010, jontymo wrote:

    > No doubt the socialists are cheering to the rafters.

    It's the paper-shufflers, button-pushers and spivs who are
    getting worked up.

    > It saddens me that so few people realise that the financial
    > services industry is what keeps (and has kept) Britain from bankruptcy.

    Sorry, chum, but we can't all make a living by cutting each
    other's hair. And we can't make a living by counting money and
    pressing computer keys.

    > We don't make anything in this country anymore. We are
    > wholly uncompetitive in most industries. Asia is full of
    > individuals who are better

    Yes, and they can do "finance" better than you lot, too.
    It's well past the time to put a stop this party, and it's
    fabulous that Europe has done it. It should have been
    England, the country of Robin Hood, who put an end to it.
    Better late than never.

  • Comment number 44.

    April 2010 -

    'Public expenditure as a share of GDP in two parts of the country (Northern Ireland and Wales) is about 70% of GDP.

    Public spending in the North West, Yorkshire and Humberside, the West Midlands and in Scotland is around 55% of GDP.

    Meanwhile, public spending as a share of GDP in London remains low at 35%.'

    http://www.ibtimes.com/articles/20936/20100426/uk-public-spending-48of-gdp-cebr.htm

    It is reasonable to expect the finacial sector to influence the London 35 percent figure. Its part of the whole financial sector dependency problem.

    1300 individuals paid over 1 million GBP in tax in the last quarter. It was one of the things that helped Darlings borrowing figures.

    I would be surprised if people did not leave.

  • Comment number 45.

    27. At 9:24pm on 30 Jun 2010, truths33k3r wrote:

    > if I take a huge gamble and it does not pay off then
    > I will lose my money.

    Yes - we must never support bankers who pass thier losses onto the public. And we have to make them stump up damages for what's happened too.

    When they've paid thier debts to me down, they can grumble about taxes. Sorry, but until then, they work for next to nothing.

  • Comment number 46.

    40. swaption gamma says:

    'the state guarantees, implied or explicit of TBTF banks highlights that they should never have been allowed to become so big, with over leveraged, bloated balance sheets.'

    So, I would guess the aim of the regulation is precisely to stop the hedge funds getting to this state. Of course some already have, eg LTCM. I suspect it won't achieve much - too open to manipulation - but that's the logic, I presume.

    'Running a capital markets business isn't easy. For every success, there are around 50 failures...one of the last things the UK does well and profitably...'

    Eh? 50 out of 51 fail and we do it well and it's profitable??? Shurely shome mishtake, offisher!!!

  • Comment number 47.

    @ 36. At 10:05pm on 30 Jun 2010, Everydayperson wrote:

    > You must be kidding!!! The financial service
    > industry? keeping us from bankruptcy??? Hah hah hah

    I know! City bankers gouge us to half to death, pay a few taxes and then they say they've saved us! They do say the English are rather eccentric ... but this is beyond a joke.

  • Comment number 48.

    41 I read your links to your articles trying to justify extreme intrusion by the state - going into peoples' bank accounts and taxing money not spent in a predefined timescale, as if saving was a crime against the sate. You have a total disregard for private property rights and your views are anathema to anyone who values individual freedom.

  • Comment number 49.

    This country deserves what is coming to it.

    The top 1% of earners pay what - 10% of all tax plus they employ lots of other lower earners and buy lots of things - low earners like you and I or from shops or businesses where people like you and I work.

    However the majority of comments suggest that collectively we would rather all pay much more tax and a good number of us lose our jobs in order that we no longer have to be envious of those who earn more than us.

    Really - you would all be happier with 10% less and the knowledge that there a no longer a few rich people in the country than with what you have now and the knowledge that some have a lot more?!

  • Comment number 50.

    25 Justnotfair

    You can get a different job. The lower down the stack the easier the move. The problem was you accepting a bonus which was not a genuine bonus, just a dodge to allow the bank some advantage, probably a tax wheeze or a redundancy payout reduction.

  • Comment number 51.

    Come on over to Switzerland... it was already much better, its now a no brainer! with 18% tax instead of 50%, you keep 64% more of what you earn......

    Now the idiots running Europe are gifting it all to the Swiss. complete muppets!!!

    Obviously the Europeans dont give a damn about the City of London, and the polticians, keep to divert blame from their complcit role in the recession want to divert attention).

    The UK exchequor has already lost my not c.£500k annual contribution (plus our previous nanny, gardener, accountant and lawyer are a bit harder up too!)

    Go on UK plc - lets see what youve got left... BY my recckoning its only defence (Brit Aerospace).

    its a total joke - do you see France killing Argiculture. Do you see Germany banning Car manufacuring. WE DO NOTHING ELSE.

    Q. How do you make a Swiss Banker laugh?
    A. Drive all the business to Switzerland!

  • Comment number 52.

    #40 swaption gamma

    Irrelevent argument!

    Just hope that the drawbridge to your castle is as wide as it is strong.

    You are nothing but a skimmer. The only thing you add value to is your own bank balance.

    Your time is over...I sincerely hope you feel fulfilled.

  • Comment number 53.

    It is very foolish to blame the bankers for all our woes, as they are an easy target. The economic crisis was actually caused by lax regulation by governments, and the general greed of the public. We were all more than happy to share in the good times, which were really an illusion. Lots of us were guilty of going on a spending binge in the believe that house prices, shares etc would continue to rise and created a bubble which was bounded to burst. The economic fall has been great because this bubble was allowed to grow so large.

  • Comment number 54.

    48. truths33k3r
    'I read your links to your articles trying to justify extreme intrusion by the state - going into peoples' bank accounts and taxing money not spent in a predefined timescale, as if saving was a crime against the sate.'

    Why is this more intrusive than taxing income or spending, or property values etc? At least this would have the option of being avoidable! Saving's not a crime against the state, but if everyone saves at once we're all in big trouble! See recessions anon...

    'You have a total disregard for private property rights'

    No, I don't - but they cannot trump everything. How do you deal with legitimacy for a start? The big questions are about where the limits
    of private property rights lie. Nozick's at the extreme end - so probably wrong.

    'your views are anathema to anyone who values individual freedom.'

    On the basis of a tax reform proposal?? OK. If you say so!






    You have a total disregard for private property rights and your views are anathema to anyone who values individual freedom.

  • Comment number 55.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 56.

    Another complicated solution to a simple problem.
    I favour making all bankers personally responsible for what they do. When they put their own fortunes on the line they will not be so willing to take great risks. With respect, the kind of risky activity we have seen with these modern banking instruments this is not banking. It is called gambling.
    Personal liability is simple and does not require complicated rules for compliance.

    It is clear to me that there are some people in the UK who have grown up always having a BBC. Just go anywhere outside the UK and you will see how everyone else has cheap, often state controlled or political and agenda driven media. The so-called "independent" media companies are the worst. Constantly intruding in your private space with advertisements and other unwanted pollution. Radio particularly is alive and vibrant in the UK directly as a consequence of the high standards driven by the BBC. It is not like this anywhere else in the world.
    You have one of the most creative media industries in the world because of the BBC. Agenda driven "independent" media which does not have codes of conduct, like the BBC, lower standards of journalism. You Brits dont know how lucky you are. Wake up before you destroy the one thing left that is Great about this country.

  • Comment number 57.

    5. At 8:01pm on 30 Jun 2010, Everydayperson wrote:
    golly gosh... popping off overseas eh? How will we cope without them!

    -------------------------------------------

    I don't know. Obviously the 50% tax they pay on these bonuses will be lost to the exchequer, so I suppose your taxes will have to go up, or services will have to be cut a bit more.

  • Comment number 58.

    Well, well well. Just got back to pick up this news. Only read it the once but it certainly looks like a step in the right direction.

    Now if all these traders take off to foreign climes I will personally take over their role and I promise not to cost the country more than this last lot have. Lets see if their really as valuable as they think they are.

  • Comment number 59.

    49. Michael says:

    'The top 1% of earners pay what - 10% of all tax plus they employ lots of other lower earners and buy lots of things...collectively we would rather all pay much more tax and a good number of us lose our jobs...'

    You're confusing money-shifting with producing stuff that makes our lives better. The skills and resources remain - we just have to utilise them properly. Now top-earners may bring some money into the country - but they also take a lot out, divert skills and resources to luxuries and sometimes trash the economy. I'd say their benefit to us was a bit more uncertain, really.



  • Comment number 60.

    Hedge funds and betting shops, basically what's the difference? The world would function very well without both. I'm sure people would find more productive things to do with their time and money.
    I say squeeze them for every penny we can get back into rebuilding the economy.
    Or would we rather have fewer police, teachers, etc etc.

  • Comment number 61.

    30. At 9:32pm on 30 Jun 2010, jontymo .

    Simple answer to that one jontymo, the ones who replace these overpaid self serving charlitans. Do you think the business will disappear? Let me tell you if and when these people decide to go to pastures new the vacency will be filled in seconds by people who are far more able and far less greedy.

    I just hope the door doesn't hit them on the way out.

  • Comment number 62.

    They will quit the EU?

    Bye then! And don't forget to sell your mansion. May help to correct the overinflated property prices.

  • Comment number 63.

    Greed must be controlled. All financial institutions must be controlled by the people, not individual mercenaries working for shareholders. National debt reflects the power and greed of these institutions and, it's the man on the street who has to pay when it all goes wrong.
    " I owe no one anything yet they say I am in debt " Leon Trotsky

  • Comment number 64.

    Zero sum game guys - and your game is up. Cheerio, hedge funds. We won't miss you half as much as our pensions.

  • Comment number 65.

    37. At 10:09pm on 30 Jun 2010, Wee-Scamp.

    Excellent comment, worth reading at least twice.

  • Comment number 66.

    I'm not sure that it is such a bad idea to lure risky players away from the rest of the game, rather than to regulate them out.

    And I'm not sure that running off to Switzerland would be such a great solution for many hedgies either. I mean, it isn't the great tax haven it once was and increasingly globalised responses to the economic crisis may make its future as a haven for hedgies less certain.

    But there are a lot of trust issues here.

    Ordinary people facing pension cuts, VAT increases, reduced benefits, more unemployment, etc, etc really have lost just about every last drop of compassion for the 'greed is good', cowboy financiers who shovel money into their own pockets - whether hedgies, bankers or whatever. (Just look at the public anger about the politicians' expenses and that was pretty small change by hedgie bonus standards)

    When there is little to go around, big bonuses to individuals or to small groups, seem more obscene then at times of plenty. It's not just about jealousy, it's also about fairness and justice.

    The hedgies might be safer running away to Switzerland. The Swiss don't have much of a track record of civil disorder or rioting as far as I can recall.

  • Comment number 67.

    44. At 10:36pm on 30 Jun 2010, YellowBrickRoad wrote:

    .............I would be surprised if people did not leave.

    ............................................................

    But here is the point you and they are missing, we will not notice they are gone. They will be replaced in an instant by less greedy able persons, probably of a better calabre.

  • Comment number 68.

    #38

    I'm certainly not a statist but then the financial services sector isn't run by real capitalists. Real capitalists would be opportunistic and pro-active and build industries.

  • Comment number 69.

    Well if your going to Zug better make your mind up quickly, did you see the other bit that goes with these regs:-

    The agreement includes proposals to link bonuses more closely to salaries and the long-term performance of the bank.

    Large severance packages for departing executives will also be limited.

  • Comment number 70.

    51. At 10:56pm on 30 Jun 2010, nilihist wrote:


    "The UK exchequor has already lost my not c.£500k annual contribution (plus our previous nanny, gardener, accountant and lawyer are a bit harder up too!)

    Go on UK plc - lets see what youve got left... BY my recckoning its only defence (Brit Aerospace)."

    Thanks Nihilist, for ably demonstrating the inherently arrogant, self serving, obnoxious character of you parasitic bankers. Don't concern yourself about the UK, we'll get by without you. Just enjoy living wherever you choose to, as the pariah you have become.

  • Comment number 71.

    Well this is ridiculous, how can a private company's pay be dictated by the government?

    Surely one of Cameron's promises was to make sure that big decisions were returned to Westminster to be voted on?

    Set aside the morals of hedge funds for a second. They did not cause the financial crisis, that is an extremely narrow minded and ill informed view to think they did.

    They contribute tax and have an impact on the wider economy. Why drive them out of the country, seems stupid to me. What exactly do we do in this country? Our industry is uncompetive, agriculture a joke, and the biggest portion of our economy, aside from the government, we seem set on getting rid of. This is stupid beyond belief.

    Also, speaking from experience, it is impossible to dictate bonuses, what is a big one? How can shares be forced to be dished out if the company isn't publicly traded?

    Could you see John Paulson being told by the SEC to be paid in shares rather than cash?

    Well I'm off as soon as I get the chance, this country is a joke, as is Europe.

    Why can someone in this country not aim to be successful? Has this country seen the only routes to money being someone who kicks a ball around a field with 21 other blokes, or simply some half talented individual made famous by X factor or whatever. Depressing sums it up.

    Right now I prefer to aim, and as cliched as the American dream is, you are less likely to find people being limited by the government in attempts to be a success.

  • Comment number 72.

    @truths33k3r:"If what we are actually saying is that the way that they make their money is immoral, then change rules. Ban naked short selling. Put position limits on each market."

    OK so if you can censure ‘their’ morals then presumably they can censure yours? No? I thought not somehow…

    “Ban naked short selling. Put position limits on each market.”

    Unworkable, avoidable, pointless, no economically useful effect, window dressing beloved by failed politicians with failed economies. Shoot the messenger sort of stuff.

    What we are seeing here is an EU reaction to markets setting prices for EU national loan bonds that said EU nations don’t like.

    It’s a tit for tat kids game and markets will win because they are more intelligent than governments who are hampered by democratic requirements not present within markets – thank goodness!

    Final score will be Politicians 1 Markets 100 methinks…

  • Comment number 73.

    Socialism saved capitilism from complete meltdown only a couple years ago. Why are we arguing over their bonuses at all? there should be none. They failed and now we have to pay the price.

  • Comment number 74.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 75.


    Regulating the earnings of bankers and fund managers may entail that most governments are now reviewing the content of the Communist Manifesto. Class struggle is the prime reason for regulating fat wage earners. The recession has exposed some weaknesses of the capitalist system of economics and social well being.

    I think this is just the beginning. Hopefully in the future, the margin on the salary of a school master will not be >= 10K.

    Lets keep our fingers cross.

    Robert, be watch of the upcoming trends.

  • Comment number 76.

    Oh how everyone loves to blame bankers and hedge fund managers for this mess, it’s a nice way to deflect blame from everyone else. How about a root cause of this mess being social responsibility? The credit markets imploded because Jane and John doe borrowed more than they could hope to pay back, average Joe on the street maxed out there credit without a thought of what if interest rates rise (as they always do a various stages in an economic cycle) or a thought of what if I lose my job tomorrow? Do banks have any responsibility here? Some yes, they should have been more careful who they lend too. But surely everyone who over extended on credit is also responsible too?

    Is it right for a Banker to earn a multi million bonus package? Hmm harder question, if they drive profits for their company then why should they not be rewarded for it? The problem comes when businesses offer extensive remuneration packages for just turning up, whether you do a good job or not. Then the worker has no reason to act in a responsible manner with other people’s money apart from their own moral compass (social & moral responsibility?)

    The main problem that banks can be blamed for is shockingly bad risk management and appalling due diligence. These two factors played a heavy part of why the tax payer had to bail out RBS and Lloyds. RBS’s acquisition of ABN is a glaring example of appalling due diligence and Bank’s general exposure to the risky housing sector without having sufficient capitalisation to mitigate risk was an example of poor risk management.

    But what about those that borrowed on 120% mortgage’s with 2 year low fixed rate interest deal’s? Then suddenly found when there fixed rate ended they suddenly had a massive mortgage they could no longer afford. What about those with 10, 15, 20K on credit cards they can’t afford to pay?

    Everyone is equally responsible for this mess; let’s not try shirking our joint blame to hang a select group of individuals.

    Yes the banks need better regulation, yes bonuses need to be linked firmly to performance, and equally poor performance must not be rewarded. But are the current plans going to fix that? I am not so sure..

  • Comment number 77.

    Anal, positively anal.

  • Comment number 78.

    #71. al2975:

    Nicely put.

  • Comment number 79.

    #71 al2975:

    Nicely put.

  • Comment number 80.

    truths33k3r! You're one of THEM aren't you!!!
    Secr3t, I like hangings, they 'do it' for me
    al2975, SPOT ON! SPOT ON! Al' I left Joke City, home to Camberwick Green et al, 12 years ago... never looked back!... if you want to see a product of pure British business then look at the English team (save Capello the ONLY sane guy there!)
    #77 d_m, yep! as in 'REAM & SCREAM'

  • Comment number 81.

    72. At 01:18am on 01 Jul 2010, Paul J Weighell wrote:

    Final score will be Politicians 1 Markets 100 methinks…

    ................................................

    You think so. I predict that the next one barrelling down the road will be the return of supertax, like pop groups of the 60's had to pay. 95% of all earnings over say £180k. Certainly didn't do the county any harm then.
    Politicians 2 Markets 0.

  • Comment number 82.

    76. At 03:52am on 01 Jul 2010, Secr3t wrote:
    'Oh how everyone loves to blame bankers and hedge fund managers for this mess, it’s a nice way to deflect blame from everyone else.'
    ------------------------------------------------------------
    Yep. Create a bogeyman. Tax it. Distract the people from asking about moving the tax burden back onto those who can actually bear it. But that will mean taxing highly paid meejah peeps who will scream like mad all over the newspapers, radio and TV.

  • Comment number 83.

    If Switzerland were to join the EU, what then? Norway? Iceland is out.

    No point in going to the Caribbean, there is enough 'oil spilt on troubled waters' out there as it is - no point in making it worse with financial shenanigans.

    There are financial centres in the Middle East and beyond. After all, there are now democratic countries such as Iraq, Israel, Jordan, Saudi Arabia, Qatar, Oman before you get as far as Pakistan, India, Singapore and the like.

    Methinks the old saying "Go west" (to make a living) will be replaced soon with "Go East", that it is until China runs out of money.

  • Comment number 84.

    Off to Switzerland assumes several big assumptions:
    1. Swiss will welcome them with open arms
    2. After costs of relocation, it will still be worthwhile
    3. The hedge fund owners and staff want to live in Switzerland
    4. The Swiss will grant residency & work permits to individuals concerned
    5. The Swiss will not introduce taxes on hedge funds
    6. That being in London is not more important than tax
    7. That individuals are happy to relocate immediate family and move away from other relatives and friends in the UK

    And when all that is said and done, and the move is made, will they be missed, really missed, here for their effect on the economy? Aah, Robert, you don't mention that one either!

  • Comment number 85.

    82. At 08:11am on 01 Jul 2010, Up2snuff.

    I'm not sure what you are saying on that one. My reading of this announcement is NOT saying they will increase taxes or limit bonuses, at least not yet. No, they are saying that bonuses are effectively tied to the eventual success or otherwise of the company. Personally I think it does not go anywhere near far enough and suspect it is just a prelimanery round to the introduction of supertax.

    Notice the bit that goes with it regarding severence pay. To me this is a clear indication that they are saying if your going, go now because from Jan 2011 we hit severence pay as well. Personally I think some will go and they will be replaced immidiately by equally capable people prepaired to take significently less out of the pot.

  • Comment number 86.

    Don't laugh. They're currently drafting regulations to re-align the remuneration of financial journalists with local hacks.

    Apparently your reckless reporting has seriously destabalised several flourishing Med economies

  • Comment number 87.

    "The private sector could provide all services that we currently have been led to believe that only the government should provide. There are questions about services given freely to the poor, but your standpoint that only the government can provide things such as healthcare appears to come from an idealogical, rather than a practical standpoint. "
    Its been said before, but the public sector could live without the private sector, but the private sector could not live without the public sector, as they would not be able to make a profit.

  • Comment number 88.

    Up2snuff.

    "I'm not sure what you are saying on that one. My reading of this announcement is NOT saying they will increase taxes or limit bonuses, at least not yet. No, they are saying that bonuses are effectively tied to the eventual success or otherwise of the company. Personally I think it does not go anywhere near far enough and suspect it is just a prelimanery round to the introduction of supertax."

    Maybe the hedgies don't like the idea of being payed based on long term performance as they know their performance is crap in the long term so they just want to take their money & run?

  • Comment number 89.

    The hedgies will have to go to less regulated parts of the world, and compete on a level playing field with people of other nations.

    They will lose out horribly.

    The only reason people invest in "regulated" countries is because when the crash comes, the local population will bail them out with their taxes and long term borrowing.

    By the way, has Vince Cable seen the double dip recession coming yet?

  • Comment number 90.

    67. At 11:48pm on 30 Jun 2010, Uphios wrote:

    ''...........44. At 10:36pm on 30 Jun 2010, YellowBrickRoad wrote:

    .............I would be surprised if people did not leave.

    ............................................................

    But here is the point you and they are missing, we will not notice they are gone. They will be replaced in an instant by less greedy able persons, probably of a better calabre.''


    >>>>>>>>>>>> I'm not missing anything. I can't say I 'like' 'them', I dont know 'them' but I have no doubt the job requires skill, or guess what many would be doing it. I certainly do not have a problem with them paying UK tax. What is more of a problem is that Thatcher and then Brown went big on the finance sector to plug the hole left by the steady collapse of UK manufacturing. The tax on the financial sector yields something like 20 percent of all UK tax, thats from memory. The FSA as it was has been concerned about the likelihood of this development for sometime it would appear. I dont know much about 'them' but the hedge funds appear different in behaviour to the banks, they actually take risk and if it doesnt work then they have to pay up. You dont take risk unless you expect to get a reward. And if you are no good then you soon leave the game because you have lost your capital or nobody in their right mind will loan you theirs to play with. The problem is as I have pointed out before is the finacial sector as we know it came here pretty rapidly and there is no reason why it should not leave just as rapidly. If it does then believe me you will notice it. As for the UK 'getting on', that doesnt match the history of activity leaving this country voluntarily or involuntarily. Take a look at the economic performance of this country and strip the financial sector away and all it shows by defintion is decline. The mentality amongst some of the population is ignorant bliss or denial. If you have a spanking hot car and you put successively small engines in it then you are not going to get up the hill eventually.

    I can assure you that anytime a business that does not have to be based in the UK opens the book to look at what to do one scenario will be somewhere on the page, that is leave the UK. Why do you think so much activity has been going. Until the government changes that we are in the whatsit. I doubt the UK population will enjoy the likely measures taken to make the UK more competitive longterm, anymore than they are enjoying the so called 'austerity' measures being put in place which are just the recognition that the books have to balance unless strong growth occurs.

    I have posted the recent public spend percentage per region. These are up to 70 percent. Some people point to the Swedish model. That is 55 percent public spending. Basically the London based private sector is carrying the country, public spending there being 35 percent. I am not London based BTW. But by all means educate me if I am wrong. Then I dont have to worry about whether I have to move at some point.

    The government sets and maintains the business environment and individuals in business react within it as they need to to operate. Business drops, then tax drops. The public sector being paid for via taxation. Most people have children, therefore most people should be worried about what is going on. Darlings and Osbourns employment graphs are very similar for the next few years, both are downwards and both rely on overall growth to stop going down.

    'They will be replaced in an instant by less greedy able persons, probably of a better calabre'

    The job defines the 'calabre'. It is a competitive environment. Rapid realtime trading is difficult due to the timeframe requirements, I have tried it, not in the City.

  • Comment number 91.

    80 FawltyPowers:

    ..the English team...

    Dont get me going, a teabag stays in the cup longer.

  • Comment number 92.

    Can I just bid a fond farewell to all those in the financial services "industry" who are about to leave for sunny Switzerland. It is of course absolutely beyond doubt that in a nation of 60 million people, no one can be found with your superior talents, intelligence and work ethic, and who would do your job for about 10% of what the clowns who run the companies you work for are prepared to pay you.

    We will all miss your arrogance, self-love and inflated egos,so evident on these blogs, and as for all that tax you pay, well given the state of the country's finances as a result of bailing out your socially useless "industry", it hardly matters any more. No amount of tax from a few thousand people is ever going to repair the damage done. That will be left to the remaining 60 million to sort out.

    Please don't come back, though, we'll struggle along just fine without you, I'm sure.

  • Comment number 93.

    Hedge Fund Managers
    Pension Fund Managers
    Investment Fund Managers

    They all take more than they’re worth in my view.
    The only fund manager worth his/her salt is those that don’t.

    And you can fit their names on the back of a stamp and still have room for the Lord’s prayer.

    My experience is trust none of them and stand and fall by your own decisions.

  • Comment number 94.

    81 Uphios:

    'You think so. I predict that the next one barrelling down the road will be the return of supertax, like pop groups of the 60's had to pay.'

    Never hear of Exile on Main Street then. There will always be somewhere. If you can employ 10 then the US which is normally difficult to get into has an open door, not that I am looking that way. I just check things out. Failure to prepare is preparing for failure, and just like the aircraft guys say, attitude gives you altitude. I may not go, and if I have a balanced option mix then chances are it wont be needed. And if it is I just press the button when the flags come up.

    BTW The measurement of the environment is not just tax. It never can be.

  • Comment number 95.

    What is wrong with some of you people !

    Hedge funds didn't cause the financial meltdown. yes they profited from it by predicting which way banking shares would go, but they most certainly didn't cause it.

    Some people on here must be fairy clueless about the way the financial world works. Successful hedge funds on the whole create a huge amount of money, both for the hedge fund manager but also for the treasury by way of taxes (both personal and corporate). If these managers and business relocate to tax free havens, then what do you think that means.........bingo......it means millions and millions that WILL NOT go into the public purse.

    So many people are saying they don't care if these people leave....well I'm sorry, but where do you think the money will come from to pay all your child tax credits and everything else half of the people out there get.

    Wake up and take a look at the bigger picture please, and stop being so short sighted.....if these people (and their wealth) leave the UK, then we'll all suffer as a result.

  • Comment number 96.

    @ 90. At 09:03am on 01 Jul 2010, YellowBrickRoad wrote:

    > Rapid realtime trading is difficult due to the timeframe requirements,
    > I have tried it, not in the City.

    No. It's the same as buying and selling bananas. Lot's of bananas, yes, but it's still the same game, i.e a doddle.

    If these people are clever, let's move them away from simple jobs like buying and selling bananas and give them something challenging. And if they aren't clever, then they can be gardeners or litter pickers etc. (no disrespect to gardeners - I know it's difficult and banker-dunces couldn't manage it).

  • Comment number 97.

    "Public expenditure as a share of GDP in two parts of the country (Northern Ireland and Wales) is about 70% of GDP.

    Public spending in the North West, Yorkshire and Humberside, the West Midlands and in Scotland is around 55% of GDP.

    Meanwhile, public spending as a share of GDP in London remains low at 35%."

    Here's how it works:
    A whole bunch of people drive vans, stack shelves, operate tills etc in places like Belfast, Barnsley and Banff. As a result, the companies they work for make money (hopefully). As the company HQ is likely to be in London, that's where the accounts get prepared. So as if by magic, a whole chunk of private sector activity which happened nationally gets "credited" as happening in London.

  • Comment number 98.

    Robert

    You are wrong to say that the remuneration policies of hedge funds did not contribute to the credit crisis. What happened was this. Hedge funds were in such demand as an asset class that they were able, uniquely in the City as far as I am aware, to demand a performance fee of 20% of fund gains, based on the paper value of their investments (rather than on cash realisations as the model had originally evolved in the private equity sector). Couple this with accounting standards which permitted (indeed insisted) that accrued but unpaid interest on debt instruments be incorporated into the "fair value" of a loan position and you had a recipe for disaster. Hedgies figured out that they could take PIK debt instruments (non-current pay, Payment In Kind, bonds) into their funds and write them up in value every quarter without the likelihood of final redemption ever really being considered. These PIK instruments were the very same debt instruments that borrowers turned to in the corporate (principally private equity funded) bond market when traditional bank lenders (who as we all recall were themselves pretty bullish in those days!) considered the amount being borrowed to be excessive. "We'll only lend you X" the banks said, "anything else you borrow must be structurally subordinated and PIK, not to be redeemed until we are repaid." Why on earth would anybody lend the PIK notes at 10-14% compounding when repayment was dubious at best? It is the same question as "Why did anybody lend subprime mortgages?" Greed, overconfidence and misaligned incentive structures. In this case the incentive structures were at the very heart of the excessive lending (i.e. "credit bubble"). PIK notes were not due for repayment for say 10 years, but each quarter the position miraculously increased in "fair value" because more notes were being issued in lieu of interest. It was nuts. But tell someone that they get a 20% cash bonus this quarter based on a notional, fixed increase in the value of the notes and you can see why the hedge funds filled their boots. Nobody cared what would happen in 10 years; retirement would have been funded by the bonuses long before then.

    So what to do? As you point out, regulation like this will just drive the industry with its jobs and tax receipts off-shore. More sensible accounting rules would help - but we are bound by increasingly international standards and these will not change rapidly. (By the way, the accounting fair value issue of not writing down performing loans even if ultimate repayment looks uncertain is also at the heart of the looming Eurozone bank crisis.) My solution would be to accept that hedge funds will exist, and that their investors (supposedly sophisticated folks too) will continue to agree remuneration policies at a market rate. But then to require the investors in the hedge funds, if those investors are systemically important, to hold reserves or non-correlated safer assets as a buffer against the inherent volatility of hedge fund investing. So insurers, banks, pension funds etc would be required to protect themselves (and not via CDS sold to hedge funds!) as a condition of their FSA registration. It is the old adage: only risk money you can afford to lose, but on an institutional scale. And if you want to risk it anyway in the pursuit of high returns? sure, do it, but don't expect to be allowed to be a bank too, and don't expect your fund to enjoy special tax status as a pension fund or insurer.

    Any other ideas?

  • Comment number 99.

    I understand the sentiment, but as usual the politicians make broad-sweep decisions about things they don't understand.

    How do you tax a day-trader?
    Who is to say 'my' hedge-fund business isn't a taxi-service or a tanning salon?
    Are hedge-funds so regulated?
    If I am a sole trader, or my wife & I own all the shares, how do we take our (richly deserved I'm sure) bonuses?

    Kill the CDS's, HFT and naked short selling;
    and stop the bail-outs and free money for goodness sake. And also bring back mark-to-market.
    That would bring some sense to the financial sector.
    (They are all going to get wiped out anyway the way they are going.)

    I just don't understand the greed.
    What do they really want out of life?
    They just buy insecurity and unhappiness.
    Maybe what they need is counselling, not bonuses.

    Regards,

  • Comment number 100.

    87. At 08:56am on 01 Jul 2010, Averagejoe wrote:

    'Its been said before, but the public sector could live without the private sector, but the private sector could not live without the public sector, as they would not be able to make a profit.'

    The issue is that it is more difficult to export the public sector (although Frank Field, MP, Lab, has previously suggested flying patients to India for ops to cut costs which is a good attempt). The private sector is easier to export. Thats the nub of the tax problem. Thats the nub of the movement of activity abroad.

    But I have to go and earn some tax.

 

Page 1 of 3

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.