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City AM reports that European banks are preparing for a new legal battle with the European Banking Authority (EBA) to defend their new practice of paying an annually reassessed allowance in order to circumvent the EU’s bank bonus cap.
Banks in Britain, Germany, Sweden and the Netherlands are preparing for another legal battle over bonuses, as the European Banking Authority (EBA) considers banning them from paying fixed allowances to staff.
The firms’ lawyers are adamant that paying a regular allowance in cash or shares, based on the recipient’s role and reassessed annually, does not count as a bonus and so is allowed under the EU directive.
Regulators at the Bank of England are also confident that this is allowed, and the Treasury is already fighting a legal battle to have the bonus cap scrapped altogether.
If the banks fail to stop the new rule, they face hiking base rates of pay – increasing their costs every year, regardless of performance, and likely leading to thousands of redundancies the next time the economy slows down.
As a result, a legal showdown with the European authorities is likely.