* EBA set to publish draft proposal next week
* Bankers already calling up lawyers for advice
By Huw Jones
LONDON, May 17 European Union officials will
next week propose capping financial sector pay above 500,000
euros, accountancy firm PwC said on Friday, suggesting the
world's most stringent curbs for the industry will affect far
more bankers than previous rules.
The European Banking Authority will next week for the first
time put a number on where it would like its planned bonus cap
to start and PwC said in a statement that the threshold would be
set at 500,000 euros.
The EU watchdog's board met on Thursday and a spokeswoman
declined to comment before the paper is released formally for
Banking pressure groups and bank officials also all declined
to make any comment but at least one major financial sector law
firm said it had already had numerous inquiries from banking
clients on the issue.
Jon Terry, a partner at PwC, said the 500,000 euro threshold
would increase the number of staff subject to bonus capping
perhaps by as much as 10 times for some investment banks
operating in London in comparison with current UK rules.
"This will create a major challenge for banks as to how they
reward their staff," Terry said. "Bringing more people into the
stringent pay rules again further widens the gap between pay
practices in Europe and the rest of the world."
At Barclays, for example, at least three times as
many staff would be caught by a 500,000-euro bar than under a
stricter definition of people in key risk positions.
Barclays designated 393 people as "code staff" in 2012,
defined as employees whose activities could have a material
impact on the bank's risk. But 1,338 staff were paid 500,000
pounds ($765,400) or more last year, according to the bank's
annual report in 2012.
Peter Snowdon, a financial services lawyer at Norton Rose in
London said clients had already been calling him up to ask about
the implications of the 500,000 euro threshold.
"It is obviously something that has significant implications
for European business and will certainly lead some people to
wonder if they can be bothered," Snowdon said.
The European Union is looking at several ways to make banks
pay for the billions in help they have received from governments
and central banks to stay afloat in the financial crisis,
including a possible tax on financial transactions being
considered by 11 member states.
In March the EU approved a new law barring bankers from
awarding themselves payouts worth more than their salary, by far
the world's most stringent curb on financial sector pay.
The moves are in response to public anger at big bonuses at
lenders rescued by taxpayers and as part of broader efforts to
dampen excessive risk taking.
The EBS is now fleshing out the law by setting out a pan-EU
definition of who should be subject to the bonus cap. Currently
there is no common definition of who must comply with the bloc's
existing remuneration curbs.
Christopher Mordue, a specialist employment lawyer at
Pinsent Mason in London said the "massive" extension to the
bonus net will raise concerns about damage to the
competitiveness of London as a financial centre.
"So this proposal will also intensify the search for
creative solutions which allow existing levels of overall
remuneration to be retained."