Europe's banking regulator said it had broadened the definition of staff affected by the incoming cap significantly by including anyone who receives a bonus of more than €75,000 that is worth at least three-quarters of their salary.
This comes on top of a new rule that will include anyone earning more than €500,000, confirmed by the European Banking Authority yesterday.
The latest move is set to cause further anger in the UK, where bankers and politicians fear the rules will undermine the City of London’s position as the European hub for banks’ sales and trading businesses. The EU-wide bonus cap, which comes into effect next year, will restrict variable pay to the same level as salary, or at twice that level with explicit shareholder approval. It will apply to all employees classed as material risk-takers at banks based in the EU and to any such people working for foreign banks in the 27-member union.
Pay experts said the proposals include an opt-out clause that banks will try to exploit heavily. “If a firm can show that a relevant employee who is otherwise caught has no material impact on the firm’s risk profile, then that employee can be excluded”, said Nicholas Stretch of law firm CMS Cameron McKenna. “Firms will be pushing to make as much as use as they can of this”, he added.
Pay experts estimate that the EBA’s move to change the definition of material risk-takers will multiply the number of affected staff by up to 10 times at some of the smaller investment banks and three to four times at larger ones.
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