* 26 EU countries approve bonus caps, but not Britain
* End of road for resistance to caps
* Caps part of wider bank capital rules
* Rules effective in 2014, caps in 2015
By Claire Davenport
BRUSSELS, March 27 Britain suffered a
long-expected political defeat on Wednesday when it failed to
stop European Union countries waving through a cap on bankers'
bonuses, an EU law that will hit London hardest.
Corporate largesse is under attack across Europe with
Switzerland earlier this month voting to impose some of the
world's strictest controls on executive remuneration amid public
anger at Wall Street-style excess in company boardrooms.
But capping bonuses at the level of base salary represents a
setback for Britain - home to the EU's largest financial centre
- and, for some, underscores the country's waning influence in
Earlier this year, British finance minister George Osborne
tried to change the new rules but none of his EU counterparts
supported him. Britain could not veto the rules on its own.
A spokeswoman for the rotating EU presidency, currently held
by Ireland, said ambassadors from member states had reached a
qualified majority agreement on the rules.
The bonus caps are one element of new regulations to
strengthen banks' balance sheets and prevent a repeat of the
taxpayer bailouts that have fuelled public anger at the sector.
Other measures include increasing the level of capital and
liquid assets held by banks and are part of the new framework to
introduce internationally agreed rules known as Basel III.
Some members of the European Parliament are also seeking to
extend bonus curbs to fund managers but these have not yet been
On Wednesday the cap for banker bonuses received the support
of 26 EU countries - all members except Britain - at a meeting
of the bloc's ambassadors.
A referdendum this month in Switzerland - which is outside
the European Union - voted 67.9 percent in favour of allowing
shareholders to veto executive pay proposals and banning big
rewards for new and departing managers.
Britain's Osborne opposes the bonus caps which he says would
weaken rather than strengthen banks by forcing them to raise
fixed salaries to retain staff.
While the rules are set to be introduced as early as January
2014, the provisions for bonus limits will impact payouts made
only in the following year.
The rules should make it harder to make large payouts such
as the bonus worth more than 17 million pounds cashed in this
week by Rich Ricci, the head of Barclays' investment
The strict limits have already been slightly eased by
allowing bonuses of twice base salary if shareholders agree, but
are nonetheless the toughest in the world. They will also apply
to the staff of European banks operating outside the region.
Bankers willing to wait longer than five years for some of
their payout could slightly exceed the two times salary limit.
Up to a quarter of a banker's bonus can be paid in such
long-term intruments as share options, bonds or other non-cash
payments which can be cashed in after five years.
The European Parliament is set to formally endorse the new
rules in April.