Skip to content. | Skip to navigation

Personal tools
Sections
You are here: Home Breaking news EU regulator calls on banks to comply with bonus cap

EU regulator calls on banks to comply with bonus cap

15 October 2014, 20:14 CET
— filed under: , , , , ,

(LONDON) - Europe's banks must end moves aimed at getting around a controversial cap on staff bonuses, the EU's financial regulator insisted on Wednesday.

Since the bonus cap was introduced this year to clamp down on excessive pay for bankers following the 2008 financial crisis, several major global banks -- including HSBC and Goldman Sachs -- have adopted "cash allowances" to pay top employees in their European operations.

The European Banking Authority (EBA) on Wednesday said "institutions making use of such allowances should change their remuneration policies and reclassify the ratio between the fixed and the variable (salary) component so as to comply with EU legislative requirements".

The London-based regulator added that "EU competent authorities have until 31 December 2014 to use all necessary supervisory measures to ensure institutions review their remuneration policies so as to comply".

The EBA's call to action came in a report following a request by EU Commissioner Michel Barnier to investigate banks' handling of the bonus cap.

"The introduction of these allowances sends out a very bad signal to the rest of society, to the effect that the banks have not learnt the lessons of the financial crisis and have not adapted their cultures to reflect the changes in the prudential and regulatory environment," Barnier, in charge of overseeing the EU's internal market, said in a statement after the report was issued.

"Compliance with both the letter and the spirit of the law is a prerequisite to restore trust and stability in our banking system," he added.

Designed to curb excessive risk taking in the wake of the financial crisis, the EU rules came into effect in January this year and limit bonuses for bankers at 100 percent of annual salary, or 200 percent with shareholder approval.

The British government has fiercely resisted the cap and is now fighting the rules in European courts.

The banks themselves warned that the limit would seriously undermine recruiting and cause a drain of talent to financial centres in Asia, the Middle East and Wall Street.


Document Actions