The necessary coordination at national level must therefore be combined with mechanisms to ensure the agreement is able to cater to the existing productivity and activity-related differences across firms and sectors.8 Equally, where the standard of living of certain segments of households is hit particularly hard by rising energy costs, the incomes agreement should naturally seek to mitigate their straitened circumstances. In short, these considerations reveal the need to avoid overly sweeping measures to implement a potential incomes agreement that might prove too rigid for certain groups of agents. Third, any approaches that automatically link wages to past inflation or indexation clauses are also to be avoided9. The aim is precisely to reduce the risk of triggering a wage-price feedback loop. In this regard, workers with collective bargaining agreements registered up to March this year that provide for any form of wage guarantee clause linking the final wage increases agreed in 2022 to developments in inflation are admittedly in the minority. Nonetheless, the figure (30%) is notably higher than it was at the end of 2021, when it stood at 17%. Of even more concern is the fact that this figure rises to 50% of the total when considering the agreements entering into force in 2023, albeit still referring to a small number of agreements in this case. Fourth, any incomes agreement should provide for multi-year wage increase and job protection-related undertakings. This would offer households and businesses some certainty in their spending and investment decisions.

The authors use data on 70 large internationally active banks and separate them into two groups: those with low and high concerns about MDAs due to different preferences over stable dividends. [10] By comparing how these two groups of banks behaved when MDAs were introduced and during the Covid-19 stress, they explore the effect of automatic distribution restrictions on banks’ capital surpluses to regulatory requirements and their willingness to lend. [11] They find that at the time MDAs were introduced, banks more concerned about distribution restrictions and with low capital surpluses above regulatory buffers worked to build greater capital surpluses than their peers. [12] MDA policy acted as intended, by incentivising banks to build and maintain their loss absorbency in normal times hence helping the banking system to become stronger against shocks. A less comfortable message comes, however, from the analysis of bank behaviour during the Covid-19 period. Bank boards are concerned with investor reaction in response to a dividend cut. But they are even more concerned with investor reaction in response to an AT1 coupon cut. One reason for this is the different claims on banks’ net assets that different investors have. Shareholders maintain their claim on banks’ future profits regardless of whether they receive a dividend in any particular period. This is not the case for AT1 holders – if they lose a coupon this period, they will not recover it thereafter. It’s instructive to note that regulators that restricted distributions during the Covid-19 crisis fell short of restricting AT1 coupons.