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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 European Banking Authority survey found that the median average ratio of bonus to salary across the block was 122 per cent for executives and 139 per cent for other risk-takers, such as traders. But one country reported an average ratio of 313 per cent for traders and one institution had a ratio of 429 per cent for executives and 940 per cent for other staff.
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”.
A fixed cap on bonuses would be resisted by Europe’s main financial centres, chiefly London. “If they do put caps in, this could have disastrous unintended consequences. It could result in significant increases in fixed pay”, said Jon Terry, global head of human resources consulting at PwC. “It substantially affects the flexibility of the business.”
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