February 19, 2013

FT, if rightly concerned with bonus cap, why not with other regulatory caps?

Sir, you are not being consistent. In “Bonus cap is a bad omen for Britain” February 19, you rightly argue that “politicians are a poor substitute for the markets… A cap on the ratio of variable to fixed pay… removes a tool for managers to control risk”.

But when regulators allow different capital requirements for banks based on perceived risk, and thereby are effectively substituting for the markets, and capping the returns on bank equity for assets perceived as risky when compared to assets perceived as infallible, and thereby discriminating against borrowers perceived as risky favoring those as safe, then you keep totally mum about that.

With that attitude are you not favoring bankers more than their shareholders or their borrowers and, if so, is that really living up to your own motto?