Banks to fight EU bonus rules

Banks have three weeks to publicly put their case against tough new rules to curb bonuses to Europe's banking watchdogs.

The Committee of European Banking Supervisors backed stringent EU plans last Friday to cap the proportion of their bonuses that bankers can take in cash at 30 per cent. It has also recommended other measures such as a minimum bonus deferral period of three to five years, longer for managers, and a provision for clawbacks, especially if the institution is undergoing financial difficulties.

The committee has called for further consultation and issued an open invitation to interested parties to present their comments on 29 October.

The committee's support for the tough proposals will be a shot across the bow for UK banks which are about to enter the bonus season. The UK regulator, the Financial Services Authority, has taken a softer stance, allowing up to half of the bonuses to be paid in cash.

The plans follow the publication of another testing draft proposal on the taxation of the sector from European commissioner for taxation and customs, Algirdas Semeta. He has recommended an EU-level Financial Activities Tax, not to exceed 5 per cent, which could raise up to ¤25bn in revenue. It would apply to banks' profits and bonuses which Mr Semeta said were "under-taxed".