Financiers eager to make allowances for the European Banking Authority

European Union

The European Banking Authority, which is headquartered in London, is often thought of as the sole body within the UK’s financial district to believe the EU’s cap on bankers’ bonuses to be a good idea.

The Bank of England has gone into convulsions over the move, as has (rather predictably) the Treasury, while the negative view is also assumed to apply to all City workers – who tend to believe that as there’s no end to their talents, their pay should be similarly unrestrained.

Still, there are more thoughtful bankers who rather welcome the cap, as it has provided the cover of some sort of action on banking pay, while allowing the City an incredibly easy way of ignoring the new rules.

All of which might be topical this week, as the banks report results and bonus-pot sizes, just as the EBA gathers to discuss actually making the policy work.

The problem has been that, when faced with the new rules stating banks could only pay bonuses of two times salary, the financiers came up with the cunning move of simply, er, rebranding the bonus as an “allowance”. This utterly predictable ruse easily outmanoeuvred the EBA, so this week it will attempt to translate into law a legal opinion that “allowances” are really bonuses. This time, what could possibly go wrong?

Where Lionheart failed, housebuilders succeed

It was Richard I who once quipped that he would have sold London if only he could have found a buyer – but it took eight centuries for that germ of an idea to become government policy.

Now, of course, the Lionheart’s project is almost complete, with a sizable chunk of the capital in the hands of shady tycoons who share our heroic monarch’s sketchy knowledge of the English language, as well as his love of spending as much time as possible overseas.

But what have they bought? Some housebuilders have started releasing American Psycho-style adverts to flog high-rise flats to City workers, which has only helped fuel fears that the London market is a tad toppy.

Still, as we enter a week in which Persimmon, Bovis and Barratt all report numbers, investors are starting to do the unthinkable – and focus on house prices outside London. When they make contact with the regions, they are finding scores of builders who reckon you’d have to be a complete idiot not to make money in the current environment, thanks to initiatives like Help to Buy – another age-old property policy that’s handy when you’re out on an election crusade.

When the bookie isn’t always the winner

For those who like a punt, there’s a full card this week in the world of gambling. The big races are being run by the high street bookmakers William Hill and Ladbrokes, who both happen to be unveiling annual results (Friday and Thursday respectively), at a time when the former has a relatively fresh jockey on board (in new chief exec James Henderson) while the latter is searching for a new one.

They will be riding horses on ground that is less than good, following the introduction of the new point of consumption tax, which charges bookies for profits made from UK punters, even though their websites have long moved offshore.

As a result, investment bankers have been whispering that the industry now needs to save costs by consolidating (and paying bankers large fees) – and some in the industry seem to have been persuaded by the City’s enticements. William Hill has been in talks to acquire rival 888, and while the negotiations were abandoned last week, most industry watchers think a deal is inevitable.

There’s an irony here, of course. Like a plucky gambler, betting firms may back a winner, but in the world of M&A, the investment banker is the bookie. And, as Hill and Ladbrokes know, the bookie always wins.

Powered by Guardian.co.ukThis article was written by Simon Goodley, for The Observer on Sunday 22nd February 2015 09.00 Europe/London

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