Parliament ups pressure as UK banks dodge EU bonus cap

  

European Union rules to cap bankers' bonuses were in doubt on Monday (10 March) after the bloc's lawmakers agreed to consider a revamp to stop Britain's banks softening their impact.

The cap is one of the most high-profile rules from the 28-country bloc after public anger over high pay at banks, many of which were propped up by taxpayers in the 2007-09 financial crisis.

The rule limits a bonus to no more than the fixed salary, or twice that level if approved by the bank's shareholders, and will affect 2014 awards to be handed out early next year.

Parliament scrutiny

Udo Bullmann, a German centre-left member of the European Parliament's economic affairs committee, questioned how the European Banking Authority has fleshed out the rules, saying their scope was narrower than the lawmakers had wanted.

It would only affect a selective number of bankers, Bullmann told a committee meeting in Strasbourg, France. The EBA scaled back its initial draft to hit fewer bankers.

The European Commission and the EBA could quickly tweak the rules to avoid a prolonged delay, and the committee will put their concerns to the bloc's financial services commissioner, Michel Barnier, when they quiz him next week, Bullmann said.

Britain's HSBC has said it will give new "allowances" – expected to take the form of monthly or quarterly payments in cash or shares – to senior staff to boost their fixed pay, meaning that higher bonuses could then be awarded. UK peers Lloyds and Barclays last week indicated they would follow suit.

"What's going on in the UK? There is a lot that's happening that is not in line with the political decisions that have been taken here," said Othmar Karas, an Austrian centre-right committee member.

Veto power

The European Parliament has the power to veto the rules, effectively forcing a rewrite, a step that would mean they might not be in place to cap bonuses paid out in early 2015.

An official from the Commission, which has endorsed the rules, said without them it would be "very difficult" to implement the wider bank capital requirements law of which they are part.

The new rules set pan-EU criteria for deciding which bankers have their bonus capped by including anyone earning more than €500,000 a year for the most part.

"If there is no harmonised criteria by the end of the year then they won't apply to 2015 bonuses. That is not satisfactory," the Commission official said.

The EBA is already reviewing planned allowances to see if they comply with the new law.

Britain, meanwhile, is challenging the bonus cap in the EU's top court, arguing the rule will make it harder for lenders to cut costs when required because it encourages a higher level of fixed pay. Bonuses, meanwhile, can be cut or withdrawn easily.

The European Parliament will have to vote on any proposal by mid-April, after which it goes into recess ahead of May elections.

Bonus rise by a third

While EU lawmakers debate tightening rules on bonuses, bankers meanwhile seem largely unaffected.

According to a survey published on Tuesday, almost half of Britain's bankers and other financial services professionals who received 2013 bonuses were awarded more than the previous year, with the average payout rising by nearly a third.

Bonuses were unchanged from 2012 for 21% of 700 professionals surveyed by financial recruitment website eFinancialCareers, with only 18% of those surveyed receiving less than a year earlier.

The majority of workers picked personal performance as the primary factor in determining their bonus, while 19% said their award related to their employer's results.

A series of banks have recently disclosed that payments are on the rise, upsetting shareholders who believe that bonuses should reflect company performance.

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Comments

Joe Thorpe's picture

Why don't they cap bus drivers pay or train drivers pay? they cause a lot more grief across Europe than the pay of British bankers who arent even in the Euro & can't be accused of damaging EU banking institutions. UK banks have not caused one single EU institution to bail them out. Will the EU top up the UK tax take to make up the shortfall that the government takes as its near 50% cut from bonus payments paid to bankers?

Why pick on UK workers? why not pick on French farmers who are subsidised or German car workers? It's sour grapes because the Euro is a disaster & they dont like the words I told you so & they wont take the blame for its failings. It is much easier to blame bankers in the UK who had nothing to do with the Euro.

Don Latuske's picture

Good for you, Joe!! Bankers are not my natural allies, given their recent antics but I'll be damned if a bunch of fuckwits in Brussels/Strasbourg should stick their noses in where they are not wanted. I'm surprised they haven't put a cap on their own incomes which, God knows, are large enough to make them bankers or something that sounds very nearly like.