EU watchdog says bankers' allowances breach bonus rule
By Huw Jones and Steve Slater
LONDON (Reuters) - New types of allowance paid to bankers are nearly all in breach of the European Union's cap on bonuses and must be changed by the end of the year, the EU banking watchdog said on Wednesday, raising the prospect that banks will have to bump up basic pay or risk losing top staff.
The sight of bankers pocketing hefty sums at a time when many people are hit by pay freezes and high unemployment across Europe prompted the EU to cap the bonuses of bankers earning more than 500,000 euros ($630,000) a year.
Bonuses cannot be more than basic pay, or twice that amount if shareholders approve.
With banks having to be bailed out by taxpayers in the financial crisis, the world's toughest curb on bankers' pay aims to restrain the reckless who hope that bigger risks mean bigger rewards.
EU financial services chief Michel Barnier, who asked the European Banking Authority (EBA) to compile the report, said allowances sent a very bad signal to society that banks have not learnt from the financial crisis or adapted their cultures.
"Compliance with both the letter and the spirit of the law is a prerequisite to restore trust and stability in our banking system," Barnier said.
PwC, a consultancy, said the ruling was at the most severe end of industry expectations and that the vast majority of big banks in the EU will need to change their pay policies.
Sources at UK banks said they would see how UK regulators apply the ruling, and it was unclear if bonuses covering 2014 performance and to be paid in 2015 are affected. Continued...