HSBC has reignited controversy over City bonuses after it introduced new pay allowances to sidestep an EU cap on bonuses.
Chief executive Stuart Gulliver is set to receive a £1.7 million "fixed pay allowance" on top of his £1.2 million salary to stop Brussels from cutting his pay as a result of new restrictions on bonuses.
Gulliver said he "did not want" to introduce allowances but argued the bank was ultimately forced to in a bid to retain top staff in a highly competitive industry. He is taking home £8 million in total remuneration for 2013, up from £7.5 million in 2012.
He said: "We had a compensation plan here that the shareholders liked but sadly because of the EU directive we've had to change. This isn't something we would have wanted to do … It's much more complicated."
The controversial cap came into effect in January, meaning that 2013 was the last year in which big bonuses could be paid. Under the new rules, bonuses will be capped at 100 per cent of pay, or 200 per cent with shareholders' approval. The bank confirmed it will apply for permission.
Gulliver added: "Our view is the same as the Government’s, which is taking legal action against the EU."
The Asia-focused bank revealed its bonus pool for top staff rose 6 per cent to £2.3 billion last year. It said 239 employees received more than one million pounds in 2013.
Othmar Karas, vice president of the European Parliament told The Independent: "I do not comment on the practices of individual banks. I assume that Britain will fully meet its obligation to implement the European Directive we adopted last year."
Last year, the UK government filed a lawsuit against the bonus cap arguing that reducing compensation won't make the banking sector safer and could see the City losing its competitive edge as a global financial centre.
A campaigner with the Robin Hood Tax group said: "HSBC haven't so much circumvented rules on bonuses as driven a coach and horses through them. The only way to rein in bankers’ remuneration is to make banks pay their fair share to society."
Shares in HSBC fell more than 4 per cent in mid-morning trade after the group missed profit expectations on Monday.
HSBC reported a 9 per cent increase in pre-tax profits to $22.6 billion, up from $20.6 billion in 2012, but missed forecasts of $24.7 billion as it warned of further volatility.
The bank has axed more than 40,000 jobs over the past three years to 254,000 at the end of 2013 and closed more than 60 non-core businesses in a bid to slash costs.