EU tries to stop banks swerving bonus cap rules
THE EUROPEAN Union banking regulator is preparing to clamp down on a system of allowances, paid to bankers to get around tight new bonus rules.
Michel Barnier, the EU financial services commissioner, said banks that pay employees monthly allowances in order to boost their take-home pay without directly contravening the bonus cap will be examined by regulator the European Banking Authority (EBA).
“If we note any deviations or sidestepping of the law then the EBA needs to assume its responsibility and react,” Barnier warned yesterday, adding: “I would like it if we could move fast now.”
A number of UK banks have already said they will pay allowances, including HSBC, Lloyds and Barclays. Martin Wheatley, chief executive of the Financial Conduct Authority has said the payments are legal.
The new measures, which were approved by Europe and came into force in January this year, set bonuses at a maximum of one times annual salary, unless two times salary is approved by the employer.
The chancellor George Osborne is fighting the rules in the courts.
Belgian lawmaker Philippe Lamberts urged Barnier to take the UK to court over sidestepping of the bonus cap.
“We don’t think it’s tough enough,” he said of the new rule.
In January ratings agency Fitch warned that the cap would do little to curb pay of top executives, due in part to inconsistent enforcement.