Banks seek ways to mitigate European bonus curb

Thu Feb 28, 2013 1:06pm EST
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By Carmel Crimmins and Kirstin Ridley

DUBLIN/LONDON (Reuters) - From paying housing costs to devising "loyalty" payments, banks in Europe are already looking at ways around a cap on bonuses for their top staff agreed by European politicians on Thursday.

If unable to circumvent the new rules, then some banks are likely to review the nuclear option of leaving the region to ensure they can still attract star traders and rainmakers put off working in "low income" London, Paris or Frankfurt.

"The banks are notorious for getting their way when times are tough," said Jason Kennedy, chief executive of financial recruiters Kennedy Associates.

"What Brussels is doing is putting European banks at a disadvantage compared to their U.S. rivals, and it is not something they will tolerate. They will definitely come up with interesting schemes to bypass this."

Firms have already offered top bankers from the U.S. large housing allowances in order to persuade them to come to London, and the curb on bonuses is seen as making it harder still to attract the best in the industry.

Banks in London have a history of finding ways around payroll legislation they don't like. In the 1990s some paid part of their employees' salaries in exotic forms such as gold bullion, diamonds and fine wine to avoid a form of payroll tax.

Senior bankers warned that the curbs would hurt European firms with large investment banking units, such as Barclays (BARC.L: Quote) and Deutsche Bank (DBKGn.DE: Quote), and benefit rivals such as U.S. bulge-bracket firms and up-and-coming Asian players.

"There is a risk that if the level playing field is not maintained, the real talents in Europe will move out," Severin Cabannes, deputy chief executive of France's Societe Generale (SOGN.PA: Quote), told reporters at a conference in Abu Dhabi.   Continued...

The Barclays headquarters building is seen in the Canary Wharf business district of east London February 6, 2013. REUTERS/Neil Hall