City outrage as Europe stands firm on bankers' cash bonuses
Bankers were yesterday told there will be no backing down from an EU demand that they should be paid no more than 20 per cent of their bonuses up front in cash, as experts said Europe's pay rules would be the "toughest in the world".
The Committee of European Banking Supervisors (CEBS) has resisted an intense lobbying effort by UK officials and the banking industry, which pleaded for the rules to be watered down and phased in only gradually.
Applying from 1 January, the requirements finalised yesterday will cover this year's forthcoming bonus round. Many bankers in Britain are top-rate taxpayers, so any cash component of their bonuses is hit by a hefty 50 per cent tax take.
The guidelines announced yesterday are seen as more stringent than the principles agreed by the G20 in the immediate aftermath of the financial crisis. They sparked howls of outrage from the City, with many in investment banking arguing they would badly damage European banks' competitiveness on the global stage, as they are to apply both at home and abroad.
But the CEBS, made up of central banks and financial watchdogs from across the European Union, said the new rules would promote "sound and effective risk management" across a sector still recovering from crisis and which faces challenges from the continent's sovereign debt worries.
The EU committee did make concessions on some points, such as giving banks some discretion over how long employees must retain shares awarded in a bonus before selling them.
Britain's Financial Services Authority, which did not comment yesterday, is set to incorporate the requirements into rules of its own, which will be published within days.
But the City reacted with dismay. Simon Lewis, chief executive of the Association for Financial Markets in Europe, which represents the City's investment banks, said: "These requirements will mean that banks operating in Europe, and European banks operating elsewhere in the world, will be at a competitive disadvantage unless there is recognition of the need for a global agreement on compensation practices."
The British Bankers Association agreed, saying the CEBS announcement "changes dramatically the bonus landscape".
"Taken together, these rules mean that, for the key people, whatever is paid in bonus is half in shares, mostly locked away for several years, and any cash will go straight to the taxman," it said. "This represents a huge change away from the bonus arrangements of the past." It added: "We maintain that reform of the remuneration system in financial services must be globally coordinated. A global industry needs to conform to global standards, as any jurisdiction which takes a lighter approach will attract business and staff."
Jon Terry, remuneration partner at PricewaterhouseCoopers, said that "Almost no concessions have been made since the draft guidelines were published in October, which caused outcry in the banking industry for deviating so heavily from global regulation patterns. European regulation of banking pay is now set to be the most stringent in the world."
However Arlene McCarthy, the Labour MEP who is vice chair of the European Parliament's economic and monetary affairs committee said: "These guidelines will put an end to the UK Government's attempts to weaken the new EU law on bankers' bonuses. In the UK alone, over £720bn of support was made available to failing banks – more than an entire year's spending by the Government."
- 1 The difference between a migrant and refugee, in one sentence
- 2 Miley Cyrus calls out hypocrisy of women’s nipples being taboo
- 3 Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
- 4 iPhone 5c to be discontinued, no iPhone 6c to replace it
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
The difference between a migrant and refugee, in one sentence
Spain accused of 'provocation' after letting Russian submarine refuel off Gibraltar
Allonautilus scrobiculatus: World's 'rarest' creature spotted for only the third time ever
Miley Cyrus calls out hypocrisy of women’s nipples being taboo
Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Iain Duncan Smith calls for urgent ESA overhaul as part of drive to cut down welfare costs
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...