The cap is one of the most high-profile rules approved by the
28-country bloc following public anger over high pay at banks, many
of which were propped up by taxpayers in the 2007-09 financial
The rule, already the toughest curb on bonuses globally, limits them
to no more than an employee's 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.
Some members of the European Parliament accuse banks of skirting the
cap by awarding monthly or quarterly "allowances" to boost a
banker's fixed pay.
EU financial services commissioner Michel Barnier said the
allowances, which he described as a "new category of invented
revenue", were being examined by the European Banking Authority (EBA),
an EU watchdog.
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 have indicated they will follow suit.
"If we note any deviations or sidestepping of the law then ... the
EBA needs to assume its responsibility and react," Barnier told the
European Parliament's economic affairs committee.
The EU watchdog has the power to require a national regulator to
comply with the bloc's banking rules.
Barnier wants parliament to endorse rules the EBA has written to
implement the cap and avoid a delay that could mean the rule will
not be in place for bonuses awarded next year.
Parliament has the power to veto the rules and effectively force a
"I would like it if we could move fast now," Barnier said.
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The EBA's rules fully comply with the underlying banking law that
parliament and EU states approved, Barnier said.
"I don't think it's legally possible to expand or reduce the scope,"
Belgian Green Party lawmaker Philippe Lamberts said bankers in
London were doing everything they could to get round the cap and
urged the EBA to take a more in-depth look at allowances
He urged Barnier to take Britain to the EU's top court for
inadequately applying the bonus cap — the same court the UK has
already asked to overturn the cap.
"All options should be on the table ... We don't think it's tough
enough," Lamberts said.
Britain argues the cap 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.
Martin Wheatley, chief executive of the Britain's Financial Conduct
Authority, which regulates staff at banks, has said the allowances
The new rules set pan-EU criteria for deciding which "material
risk-taking" bankers will have their bonus capped and includes
anyone earning more than 500,000 euros a year for the most part.
Parliament will have to vote on any proposal by mid-April, after
which it goes into recess ahead of May elections.
(Editing by Matt Scuffham and Pravin Char)
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