|
|
Until now Britain has been able to deflect, amend or water down unwelcome EU financial services directives flowing from the financial crisis, usually to the satisfaction of the City. But on the bonus issue there was to be no compromise, as EU ambassadors endorsed a law that will cap bankers’ bonuses at twice their salary, even though Britain signalled it was opposed.
“These rules should have been about making banks safer”, a UK diplomat in Brussels said. “But what these proposals will lead to are increases in fixed pay for bankers, making it more difficult for banks to retain capital in a downturn, discourage banks from deferring remuneration and make it more difficult to claw back pay.”
An official vote over the plan will take place in May when EU finance ministers meet in Brussels, but Wednesday’s decision is likely to remain unchanged.
The bonus measure is a small subsection of a law that represents the biggest overhaul of bank rules since the financial crisis erupted, setting banks a more stringent standard for the quality and quantity of capital they must hold. Much to the dismay of the City, Britain fought for a stricter interpretation of the Basel III accord on capital accord – which the law seeks to implement – than France or Germany, which succeeded in watering down crucial elements. But London was able to secure its main priority – retaining the freedom to raise capital requirements on all UK banks without seeking prior approval from Brussels. This will allow Mr Osborne to implement the Vickers reforms of UK banks.
Full article (FT subscription required)