| LONDON, July 3
LONDON, July 3 Bankers voiced frustration at a
European Union cap on their bonuses on Thursday, telling
regulators it will catch too many of them and could bump up
But mindful of public anger with a sector rescued by
taxpayers in the 2008/9 financial crisis, they avoided
challenging the principle of what will be the world's toughest
curb on top bankers' pay.
Bankers crammed into the over-subscribed hearing at the
European Banking Authority (EBA) on the 18th floor of an office
tower overlooking London's financial district where many of them
They were trying to persuade the EU's banking supervisor to
tweak the details of a draft rule to limit bonuses to no more
than fixed pay for those earning over 500,000 euros ($648,600).
The EBA wants to rein in financial incentives for bankers to
avoid a repeat of the excessive risk-taking seen in the run-up
to the crisis.
The Association for Financial Markets in Europe (AFME),
representing the world's top banks, said the cap could crimp the
free movement of labour, a basic EU tenet, and was unfair for
some staff such as highly-paid analysts who don't take risks for
the bank, or lower-paid junior bankers.
"We seen some tendency to apply an overly prescriptive and
simplistic approach," AFME director for advocacy, Stefano
A simple way round the rule would be to bump up fixed pay.
But increasing basic pay for many junior staff would increase a
bank's costs and, as a result, the risks to the broader
financial system, the AFME said.
The bonus cap can be doubled with shareholders' approval and
financial lawyers say big banks are already increasing the basic
pay of their star employees.
The limit will capture far more staff than existing EU
restraints on remuneration which restrict how much of a bonus
can be paid upfront in cash, with the rest deferred over several
The EBA said it will publish data soon to show that in some
countries few if any staff are hit by the existing restraints,
justifying the wider net.
"We have a problem with the fact that up to one third
earning more than a million euros were not considered identified
staff," said Jo Swyngedouw, who heads EBA's remuneration working
group and is a senior Belgian central bank official.
Bernd Rummel, EBA principal policy expert, said the cap will
apply to awards for 2014, meaning the bonus round of early 2015.
The EBA cautioned that its ability to make its new rule more
flexible by adding exemptions is restricted because the cap is
now enshrined in EU law.
The EBA's director of regulation, Isabelle Vaillant, said
the bonus cap will bring more consistency to the region's
banking market and will ensure fairness.
Some speakers worried about the broader impact on the
competitiveness of EU banks and their risk management.
Lex Verweij of staff consultancy Aon Hewitt said he was
"increasingly worried" that risk-taking, now concentrated in
larger institutions, will go to boutique firms, which fall
outside the rules, or pass out of the banking sector to
insurance companies. "We are already seeing that trend, going to
insurance firms," he said.
The United States and Asia don't cap bonuses but the EU curb
will be imposed on top staff in overseas branches of an EU
"I worry that we could introduce more risk into the system
by not being able to attract or retain the right quality people
outside of Europe," said Steven Ward, Deutsche Bank's
managing director of human resources in London.
($1 = 0.7709 euros)
(Reporting by Huw Jones; Editing by Erica Billingham)