* New cap set at level of salary
* Regime will not apply to bonuses paid in early 2014
* EU lawmakers agree deal despite protests from Britain
By John O'Donnell
BRUSSELS, March 20 Bankers in Europe will have
one final bonus season before they are barred from awarding
themselves payouts worth more than their salary, EU lawmakers
agreed on Wednesday, paving the way for the first cap of its
The cap is designed to address public anger at a
bonus-driven culture many European politicians believe
encouraged the risk-taking that led to the near-collapse of some
of the region's biggest banks.
The law will take effect in January 2014 but will only apply
to bonuses paid in 2015. A special provision to recognise that
bonuses are paid for the previous year's work means bankers who
collect payouts next February and March will not yet be
The new rules will make it harder to award large payouts
such as the bonus worth more than 17 million pounds ($25.7
million) cashed in this week by Rich Ricci, the head of
Barclays' investment bank.
"The parliament withstood the pressure from the British
government and did not allow any change to the cap on bonus
payments," said Udo Bullmann, a German member of parliament who
pushed for strict limits.
"Despite bitter resistance from national capitals and the
finance industry, Europe will be a little bit fairer from 2014."
The bonus talks have been emotional and divisive. Some
lawmakers, thinking ahead to pan-European elections next year,
demanded stricter rules while others tried to dilute them.
One angry British lawmaker walked out of the talks on
Wednesday, but later parliamentarians applauded and toasted the
deal with champagne.
The rules, part of a wider capital regime for banks, allow
bonuses of twice bankers' salary if shareholders agree. They
represent the toughest bonus regime anywhere in the world.
The cap has been softened to allow banks to pay up to a
quarter of a banker's bonus in share options, bonds or other
non-cash payments which attract a premium after five years.
Payments made after more than five years would qualify for a
bigger discount when calculating the size of the bonus, to make
the total payment slightly more generous than foreseen by the
The cap will be introduced despite objections from Britain
and the next step, an endorsement by European Union (EU) states,
is a formality.
Earlier this year, Britain's finance minister George Osborne
tried to change the rules at a meeting with his EU counterparts,
but no one supported him. Britain could not veto the rules on
The new rules threaten Britain's financial industry the most
of any European country and raise the risk that some top bankers
could relocate to financial centres outside the European Union.
Sharon Bowles, who as chairwoman of the parliament's
influential economic and monetary affairs committee played a
central role in negotiations, said scandals over the fixing of
lending benchmarks such as Libor had hardened resolve in the
parliament to demand the cap.
"Neither Britain nor industry ever accepted the idea of a
cap," Bowles said. "Then Libor came along and the position of
the parliament hardened."
Osborne's inability to fend off the reform underscored
Britain's waning influence in the EU and is also likely to fuel
deepening euro scepticism in Britain.
"This was a sobering experience," said one official familiar
with British thinking, who asked not to be named. "It's the
first time the UK was outvoted on financial services... There
are autopsies being carried out at the UK Treasury."
The rules are also a setback for European banks, which had
long argued that the curbs would put them at a disadvantage to
"If you want to restrict bonuses we should do it on a global
level," said Christian Clausen, president of the European
Banking Federation lobby group told Reuters.
"We have the risk that customers will do business with
American banks that still pay high bonuses."