At least let us guarantee some cyclicality in the bonuses!

Sir Prof Avinash D. Persaud in his letter “Bumper bank bonuses and banditry in the boom” suggests new regulatory capital requirements for the banks so as to get rid of a system that “adds to pro-cyclicality”. I could not agree more, especially since that would also help to reduce the “pro-cyclicality” produced by the credit rating agencies which is something I have been arguing since the Basel Accord started to be applied globally.

Though I also agree that the above is a much better way to take care of the salaries and bonuses of bankers than having regulators act directly on it, I would like to remind about the importance of fully restoring the powers of shareholders, in banking and in all other activities because as long as management have so much influence over their own bonuses there is not even cyclicality.