The European Union yesterday announced that it is set to back a crackdown on bank bonuses within the bloc. The announcement coincides with the decision to subject a broad spectrum of European banks to stress tests, to see whether they are prepared for any potential repeat crisis in the future. One Maltese bank is among them.

Both measures are being taken to ensure that public confidence is restored in European banking systems after the debacles we witnessed since the end of 2008. The bonus issue is being driven by the fact that while accounts collapsed, pensions disappeared and investment schemes withered to nothing, some bankers were still earning hundreds and thousands of euros at a time when they were actually the ones responsible for the meltdown. The disparity was glaring and the people of Europe knew it and were fuming about it.

It was, indeed, an exercise in capitalism at its worst. Capitalism is, of course, dependent on market forces and is essentially tied to the survival of the fittest. But when one considers that the banks (not all) performed so badly and contributed to Europe’s financial crisis, one has to question how bonuses were still issued. It was wrong to pay out the hundreds and thousands of euros to these people – both in moral and legal terms. How can one justify making millions and millions in losses – to then reward those who incurred the loss by giving them a package over and above their hefty monthly salary when others saw their entire savings go down the drain. This is especially more pertinent when a recent scientific study conducted in the UK found that on a points system, bankers were “less useful” to society than street cleaners and fishermen.

Perhaps they should have taken a leaf out of the British Airways chairman’s book who forfeited his own allowance in the wake of industrial disputes and registered losses.

The bankers themselves say that in staking out such a firm position, the EU has put itself at a competitive disadvantage when one looks at the US which has introduced guidelines, rather than a fixed position. Of course the bankers would say that, but it is also interesting to note that while the US stabilised within a 12-month period, European banks are still causing others to get the jitters. In other words, we are not out of the woods yet. The idea of the new regulations is for them to be pushed through before the coming ‘bonus season’. One must always remember that European banks are not only relevant to, for example a Greek or a Frenchman. Banks ‘look after’ your money by investing it in other ventures in other markets – so that €10 you put away for your child might be linked – for example to Northern Rock. So everything, in this globalised world of ours, is inter-linked.

Of course, the fact that the EU has backed the crackdown in conjunction with approval for stress tests for banks is good news all round. Faith in a good system is a good thing. But blind faith in something can lead to abuse – and that is exactly what happened to Europe’s banks. A prime example of this was Gordon Brown’s decision when he was Chancellor of the Exchequer to regulate (it was actually gross deregulation) the British financial system. For a decade it worked – and allowed the economy to boom. But that freedom brought greed and abuse which lead to the huge problems the British financial markets face today. Checks and balances are essential in every walk of life.