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 The European Banking Authority (EBA) did not say how it will toughen
the rules but this is likely to include tighter supervision and more
detail in how the rules should be applied.
After the 2007-09 financial crisis sparked public anger over bonuses
at banks that taxpayers had to rescue, the EU introduced curbs on
the pay of top bankers earning a million euros or more. The current
rules mean that 40-60 percent of a bonus must be deferred over 3-5
years, with the possibility to claw back the cash if problems like
misconduct are later discovered.
The curbs were toughened so that bonuses handed out from early next
year can be no higher than fixed salary, or twice that amount with
shareholder approval. Staff earning more than 500,000 euros will be
affected.
Top banking staff in 2012 received on average 187,441 euros
($255,200) in bonuses and 172,379 euros in base pay, making a total
of 359,820 euros, the review published by the watchdog revealed on
Friday.
This represents a 31 percent rise in base salary and a similarly
sized fall in bonuses, resulting in an overall drop in average total
pay of 10 percent since 2010, the EBA said. Many banks were still
busting the cap on bonuses that will apply to payouts from early
2015, it added.
The EBA said pay practices varied too widely among banks with
regards to the proportion of a bonus that was deferred and the
number of bankers subject to the curbs.
Only 54 percent of high earners are categorized as top bankers,
meaning many are escaping the pay restrictions.
Britain has more top earners than all the other EU states combined.
It has 2,714 earning over a million euros, but just under half are
identified as coming under EBA rules, whereas in other EU states
nearly all top earners are properly identified.
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The watchdog also noted that some banks are paying so-called
position or role-based allowances, paid as part of base salaries,
but some policymakers say these allowances are being used to
mitigate the new bonus cap.
Banks argue that such allowances are part of fixed pay, but the EBA
said they were discretionary, paid to selected staff and in most
cases only for a limited period.
"The EBA is currently analyzing this emerging practice and will set
guidance criteria to correctly assign these elements to either
variable or fixed remuneration, so as to ensure that these practices
do not lead to a circumvention of the newly introduced cap," the
watchdog said. The EBA's revised guidance will be put out to public
consultation at the end of this year and come into effect in early
2015 to ensure more consistent application of the rules.
Britain is challenging the bonus cap in the EU's top court, saying
it creates more risks by making it harder for banks to cut fixed
costs when business falls.
(Reporting by Huw Jones, editing by Chris Vellacott; Editing by
Elaine Hardcastle)
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