(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Antony Currie
NEW YORK, March 1 (Reuters Breakingviews) - Forget Europe's
bonus caps for bankers. It might make for good publicity for the
politicians, but wags in the City are already joking about ways
to get around it. So why not, for example, put a ceiling on
salaries and let clients reward good service, just as they do in
restaurants? That could allow banker pay to shrink to a more
The U.S. restaurant business even provides a model of sorts.
The Fair Labor Standards Act lets an employer pay waiters below
minimum wage as long as they earn a certain amount a month in
tips. If the combined total remains below the minimum wage, the
restaurant has to make up the difference.
Regulators could easily adapt that for the banking industry,
setting a reasonable amount that bankers should be able to earn
in a given year. There would need to be rigorous procedures for
clients to claw back tips in the event of malfeasance – the
banking world's equivalent of getting food poisoning.
But clients would be empowered to pay what they really feel
a banker or trader is worth. Long-standing M&A and underwriting
fee structures could be overhauled, while trading would probably
become more efficient more quickly, as all sides would have a
greater incentive to switch more deals to electronic platforms.
Sure, there's a chance it could turn into a boondoggle for
some. A client might decide to hire a friend, want to curry
favor or return past help. But companies looking to raise
capital or get involved in M&A and investors wanting to trade
are as cost conscious as any. They'd probably welcome the chance
to pay the bank enough to cover its expenses, including base
salaries, and then determine for themselves how much extra their
middlemen warrant on top of that.
Banks boast so often about serving customers that it would
mean they really have to practice what they preach – or expect a
welter of forlorn-looking bankers following clients out of
offices asking what they did wrong. The chance of seeing that
alone surely makes paying bankers in tips worthy of
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(Editing by Martin Langfield)
Keywords: BREAKINGVIEWS BANKS/PAY
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