* European Parliament has power to veto new rule
* Veto would force regulators to rewrite the rule
* Vote would need to be held by mid-April
By Huw Jones
LONDON, March 7 European Union lawmakers will
consider toughening up the bloc's cap on bankers' bonuses after
lenders have begun softening its impact by awarding extra
"allowances" to top up fixed pay.
The cap is one of the most high-profile rules from the
28-country bloc after public anger over high pay at banks, many
of which were propped up by taxpayers in the 2007-09 financial
The rule limits a bonus to no more than 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.
Sharon Bowles, the British Liberal Democrat chair of the
European Parliament's influential Economic Affairs Committee,
said that some lawmakers have complained that the rule is not
"We are going to have a discussion on this in committee on
Monday night," Bowles told Reuters on Friday.
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 this week
indicated that they would follow suit.
The European Banking Authority (EBA) wrote the rule, but the
European Parliament has the power to veto it and force a
"In one sense it does not help if people believe that what
they have done is being circumvented," Bowles said, adding that
the only option may be to reject the rule.
The EBA watchdog is already reviewing planned allowances to
see if they comply with the new law and the Economic Affairs
Committee will meet on the sidelines of a full parliament
session in Strasbourg, France.
Britain, meanwhile, is challenging the bonus cap in the
European Union's top court, arguing that the rule will make it
more difficult for lenders to cut costs when required because it
encourages higher levels of fixed pay. Bonuses, meanwhile, can
be cut or withdrawn easily.
The European Parliament will have to vote on any proposal by
mid-April, after which it goes into recess ahead of its May
Bowles said that if the new rules are rejected, it could
mean that nothing would be in place before bonuses are dished
out early next year.
"The UK would be able to apply a lighter regime if it
wishes," Bowles said.
While acknowledging that the banks' extra allowances "are
going to be be paid come hell or high water", Bowles added that
they should be viewed as fixed overheads that need to be covered
by capital reserves and that shareholders should consider
whether they are too high.