Assault on bonuses

A collection of German banks, including Deutsche Bank and Commerzbank, have said they will introduce new restrictions on bankers' bonuses a year earlier than originally planned.

The new rules require bonuses to be deferred for several years, allowing banks to recoup some of employees' bonus payments if they are responsible for losses in later years. They also limit the use of guaranteed bonuses.

Deutsche Bank chief Josef Ackermann said, following a meeting of the "Initiative Finanzstandort Deutschland" (IFD), that the long-term viability of banks depended on better regulation of bonuses. The IFD is a lobby group representing major financial sector players such as Deutsche Bank, Postbank, Allianz and Commerzbank.

Ackermann said the salaries of bankers would be more in line with long-term stability and "better consider the risks of banking transactions."

German Finance Minister Wolfgang Schaeuble welcomed the attempt at self-regulation by the banks, adding that the initiative taken by the IFD showed that banking regulation was not only the responsibility of governments.

Further assault on bonuses

This comes as France and the UK announced their own plans to tax bonuses, a move that has put pressure on the government of German Chancellor Angela Merkel to follow suit in order to present a more unified front. But Merkel has all but dismissed the scheme in favor of a proposal for an international tax on financial transactions.

Henning Voepl of the Hamburg Institute for International Economics told Deutsche Welle that Germany's cooperation with France and the UK on a tax on bonuses would be necessary to avoid an exodus of bankers from London and Paris to countries which did not enforce such a tax.

"We need one regulation, otherwise we would have a bias in capital markets and, as you know, capital markets are very efficient," he said. "So even a small difference in regulation would lead to substantial effects, and that in turn means we need international coordination and one regulation for the global capital markets."

However Michael Schroeder from the Centre for European Economic Research in Mannheim told Deutsche Welle that taxing bonuses would not be the right solution for Germany.

"The question on taxing bonuses is the wrong question. The problem is not the amount of the bonus that a top manager receives, but it's that the wrong incentives structures are implemented. Therefore I don't see any need for having a special tax on bonuses," he said.

Author: Darren Mara

Editor: Susan Houlton