By Huw Jones
LONDON, March 18 Bankers who sidestep a cap on
their bonuses will face action from the European Union's banking
regulator, the bloc's financial services chief said on Tuesday
as he fought off calls to toughen up the measure.
The cap is one of the most high-profile rules approved by
the 28-country bloc following public anger over high pay at
banks, many of which were propped up by taxpayers in the 2007-09
The rule, already the toughest curb on bonuses globally,
limits them to no more than an employee's fixed salary, or twice
that level if approved by the bank's shareholders, and will
affect 2014 awards to be handed out early next year.
Some members of the European Parliament accuse banks of
skirting the cap by awarding monthly or quarterly "allowances"
to boost a banker's fixed pay.
EU financial services commissioner Michel Barnier said the
allowances, which he described as a "new category of invented
revenue", were being examined by the European Banking Authority
(EBA), an EU watchdog.
Britain's HSBC has said it will give new
"allowances" - expected to take the form of monthly or quarterly
payments in cash or shares - to senior staff to boost their
fixed pay, meaning that higher bonuses could then be awarded.
UK peers Lloyds and Barclays have
indicated they will follow suit.
"If we note any deviations or sidestepping of the law then
... the EBA needs to assume its responsibility and react,"
Barnier told the European Parliament's economic affairs
The EU watchdog has the power to require a national
regulator to comply with the bloc's banking rules.
Barnier wants parliament to endorse rules the EBA has
written to implement the cap and avoid a delay that could mean
the rule will not be in place for bonuses awarded next year.
Parliament has the power to veto the rules and effectively
force a rewrite.
"I would like it if we could move fast now," Barnier said.
The EBA's rules fully comply with the underlying banking law
that parliament and EU states approved, Barnier said.
"I don't think it's legally possible to expand or reduce the
scope," he added.
Belgian Green Party lawmaker Philippe Lamberts said bankers
in London were doing everything they could to get round the cap
and urged the EBA to take a more in-depth look at allowances
He urged Barnier to take Britain to the EU's top court for
inadequately applying the bonus cap - the same court the UK has
already asked to overturn the cap.
"All options should be on the table ... We don't think it's
tough enough," Lamberts said.
Britain argues the cap will make it harder for lenders to
cut costs when required because it encourages a higher level of
fixed pay. Bonuses, meanwhile, can be cut or withdrawn easily.
Martin Wheatley, chief executive of the Britain's Financial
Conduct Authority, which regulates staff at banks, has said the
allowances are legal.
The new rules set pan-EU criteria for deciding which
"material risk-taking" bankers will have their bonus capped and
includes anyone earning more than 500,000 euros a year for the
Parliament will have to vote on any proposal by mid-April,
after which it goes into recess ahead of May elections.