Thread by @docrussjackson

#NeverForget that the cap on bankers' bonuses was introduced as part of efforts to improve regulation of the under-regulated banking sector in the wake of the 2008 crash, which led to a decade of brutal austerity, & a dangerous increase in polarisation.

theconversation.com/bankers-bonus-…

In many countries, including ours, unemployment spiked, household wealth evaporated & there were long-term negative effects on global economic growth, income inequality & political stability - & now our Govt is bringing back the same failed neoliberal policies which created this.

There is now good quality research into banking bonuses which suggests caution, with evidence of a direct relationship between “variable executive remuneration” (performance dependent bonuses) & risk taking, & other negative 'unintended consequences'.
onlinelibrary.wiley.com/doi/full/10.11…

In the US it has been found that bank CEOs with pay incentives linked to risk took on higher levels of risk in the run up to the financial crisis - starting in banks around 2000, when industry deregulation expanded these banks’ growth opportunities.

cambridge.org/core/journals/…

Financial firms where pay levels rewarded a short-term approach performed poorly during the financial crisis, being more exposed to subprime credit risk & having a higher probability of financial distress, as well as higher fines & settlements for subprime-related fraud.

Politically, it is a grotesque move for a new government, as the effect of energy & food prices prove devastating for vast numbers of households.

Why INCREASE bankers’ already very high incomes when real wages of others are dramatically decreasing during a #CostOfLivingCrisis?

Those who support ditching the cap should consider whether or not it would really boost the UK’s financial sector.

After Brexit, around 43% of the largest UK financial institutions announced plans to move some of their business & staff to the EU, where bonuses are also capped.

And what about the long-term consequences of #deregulation? Banks are not like other business. The public depends on them, & economies cannot function without them. When they fail, the whole economy goes down with them, with catastrophic outcomes.

https://twitter.com/docrussjackson/status/1572524505830133760?s=20&t=yJygPq231foTLY8gzBgOXA

Heavier bank regulation, including the bonus cap, was a response to the financial crisis. The UK's gung-ho new government should be much more cautious.

Taking big risks for potential short-term financial gain is to be avoided – whether you’re a bank or a national government.