* High earners in Britain skew lack of compliance
* New bonus cap law will make pay rules harder to avoid
* EU watchdog to finalise tougher guidance by early 2015
(Adds more detail)
By Huw Jones
LONDON, June 13 The European Union's banking
watchdog will toughen up its guidelines on bankers' pay after a
study uncovered wide variations in how lenders apply the rules
across the 28-country bloc and how banks are avoiding the bonus
The European Banking Authority (EBA) did not say how it will
toughen the rules but this is likely to include tighter
supervision and more detail in how the rules should be applied.
After the 2007-09 financial crisis sparked public anger over
bonuses at banks that taxpayers had to rescue, the EU introduced
curbs on the pay of top bankers earning a million euros or more.
The current rules mean that 40-60 percent of a bonus must be
deferred over 3-5 years, with the possibility to claw back the
cash if problems like misconduct are later discovered.
The curbs were toughened so that bonuses handed out from
early next year can be no higher than fixed salary, or twice
that amount with shareholder approval. Staff earning more than
500,000 euros will be affected.
Top banking staff in 2012 received on average 187,441 euros
($255,200) in bonuses and 172,379 euros in base pay, making a
total of 359,820 euros, the review published by the watchdog
revealed on Friday.
This represents a 31 percent rise in base salary and a
similarly sized fall in bonuses, resulting in an overall drop in
average total pay of 10 percent since 2010, the EBA said. Many
banks were still busting the cap on bonuses that will apply to
payouts from early 2015, it added.
The EBA said pay practices varied too widely among banks
with regards to the proportion of a bonus that was deferred and
the number of bankers subject to the curbs.
Only 54 percent of high earners are categorised as top
bankers, meaning many are escaping the pay restrictions.
Britain has more top earners than all the other EU states
combined. It has 2,714 earning over a million euros, but just
under half are identified as coming under EBA rules, whereas in
other EU states nearly all top earners are properly identified.
The watchdog also noted that some banks are paying so-called
position or role-based allowances, paid as part of base
salaries, but some policymakers say these allowances are being
used to mitigate the new bonus cap.
Banks argue that such allowances are part of fixed pay, but
the EBA said they were discretionary, paid to selected staff and
in most cases only for a limited period.
"The EBA is currently analysing this emerging practice and
will set guidance criteria to correctly assign these elements to
either variable or fixed remuneration, so as to ensure that
these practices do not lead to a circumvention of the newly
introduced cap," the watchdog said.
The EBA's revised guidance will be put out to public
consultation at the end of this year and come into effect in
early 2015 to ensure more consistent application of the rules.
Britain is challenging the bonus cap in the EU's top court,
saying it creates more risks by making it harder for banks to
cut fixed costs when business falls.
($1 = 0.7345 Euros)
(Reporting by Huw Jones, editing by Chris Vellacott; Editing by