EU Seeks New Curbs To Cap Bank Bonuses

Bankers’ bonuses across Europe would be capped at no more than their fixed salaries under strict new curbs sought by senior lawmakers in response to continued public anger over financial sector pay, the Financial Times reported. In a sign that Brussels is hardening its stance on banker pay, European Union parliamentarians are drawing up new caps on bonuses to be included in the bloc’s latest bank capital rules. The move comes as research from the pan-EU banking regulator reveals huge disparities in bonus sizes across the region and big differences in enforcing existing EU pay rules, which limit the upfront cash portion of a bonus to 25 per cent of the total. European members of parliament have tabled dozens of remuneration amendments to planned legislation to implement the Basel III international bank capital rules. In an indication of where this legislative activity may lead, Othmar Karas, the parliament’s lead negotiator, on Thursday signalled that a “one-to-one” bonus ratio is likely to be a key demand in talks with EU member states. To be enacted, any pay rules would need to be agreed with those states, which are generally more cautious about rigid restrictions. But one industry lobbyist warned the current political climate will make any new initiatives “hard to resist”. Michel Barnier, Europe’s top financial regulator, is encouraging the MEPs to take a hard line on the issue. He told the FT the EBA report made for “startling reading”. “I cannot see how some of the ratios included in the report of variable to fixed remuneration can ever be considered justifiable or a sensible way to manage risk and long-term interest,” he said. “It is proof once again that tougher action is necessary.” Read more. (Subscription required.)