Bank bonus windfall tax won’t dampen risk-ECB Weber

December 9, 2009

    FRANKFURT, Dec 9 (Reuters) – A windfall tax on bankers’ bonuses, as is now being discussed in the UK, would not be effective in encouraging less risky behaviour among banks in the long term, ECB Governing Council member Axel Weber said.
   “It’s not the right way,” Weber told the International Club of Frankfurt Business Journalists late on Tuesday.
   Banks should instead pay bonuses into a pool and spread out rewards to employees based on the longer-term success of the bank in accordance with the recommendations of Financial Stability Board regulators, Weber said.
   Banking watchdogs around the world are drafting rules to stop financiers’ devil-may-care pursuit of big bonuses, seen as a major factor leading up to the financial crisis as the riskiness of investments was ignored.
   The British government said late last week it was considering a tax on banks as one of its revenue-raising options, an idea the country’s banking association branded “populist”. [ID:nGEE5B61OP]
   The most likely scenario is now expected to be a temporary year-long charge for banks on large bonuses, equivalent to around 50 percent of the total bonus paid. [ID:nGEE5B61LE] 
   The Bundesbank, of which Weber is president, and German financial watchdog Bafin have asked banks and insurers to comment by next week on new compensation rules in Germany, which are due to be adopted by the end of the year.
   Weber said he would like to see financial houses voluntarily apply long-term compensation rules ahead of their official introduction.
   “I think it would be good if already this year we could send a signal to taxpayers,” he said in remarks set for release on Wednesday.
   “It would be the least the banks could do to assure social acceptance of their compensation systems,” Weber said.
   ((Reporting by Andreas Framke, Jonathan Gould and Krista Hughes; Editing by Toby Chopra; Reuters Messaging:; +49 69 7565 124))
 Keywords: ECB WEBER/BANKS  
Wednesday, 09 December 2009 11:00:00RTRS [nLAG005984] {C}ENDS

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