Europe wants to curtail London bankers bonuses

[David Guyatt]

What will happen is Brussels goes ahead with its plan to cap bonuses? Will this force the UK to leave Europe? As it stands the City of London is the most powerful business sector in the UK by far. It is the tail that wags the British dog. Meanwhile, as we might expect, the UK government is intent on protecting the banking sector no matter what - even after the banking disaster of 2008 where the bonus culture was the absolute cause of the bank collapse. And still is. What happened 6 years ago is already happening again.

UK in last-ditch effort to overturn EU bonus cap

Treasury to clash with EU in court on Monday over rules limiting bonuses in attempt to defend UK financial sector

George Osborne has said the bonus cap is perverse









By James Titcomb

8:55PM BST 06 Sep 2014

117 Comments


The Treasury is to clash with the European Union in a last-ditch effort to overturn a draconian cap on bankers' bonuses, arguing in Europe's top court that rules limiting rewards are an unjustified intrusion.

Government lawyers will on Monday lay out objections to the rules, which have been widely criticised by those in the City who argue it puts London's financial sector at a disadvantage to New York's and Hong Kong's.

As part of a systematic overhaul of EU banking rules designed to stabilise the financial system, bonuses are being capped at 100pc of banking salaries, or 200pc with shareholder approval.

The Treasury has opposed the move on the grounds that it is an overextension of the EU's remit, and does not contribute to improving financial safety. The bonus cap is seen as among the most damaging of a number of Brussels diktats on the UK's financial services industry. The Treasury said the rules could "undermine financial stability".

Rather than reducing pay, UK banks have responded by increasing staff salaries and introducing role-based "allowances" which are renegotiated each year.

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Institutions argue that the bonus cap makes them less financially safe, since higher spending on fixed pay removes their ability to scale back spending in difficult times.
The UK accounts for the vast majority of highly-paid bankers in Europe. It launched a legal challenge against the European Parliament and European Council in September, and will make its arguments public for the first time this week.
On Monday, the case will reach a court hearing in which representatives from the UK and European Parliament will give oral evidence to the European Court of Justice in Luxembourg. The move represents the last chance for the UK to present its case. The court is not expected to make a decision until next year.
The Treasury will argue against the bonus cap on six grounds. Among them, it argues that the cap unfairly confers powers to Europe beyond Brussels's remit, and that it has been introduced without any assessment of the likely impact.
The UK also argues that the cap runs counter to the objectives of the legislation, making banks less stable due to the rise in salaries, and that by applying the rules to employees of EU-based banks who work in Asia, the US and elsewhere, the rules infringe international law.
George Osborne, the Chancellor, and the Bank of England have both publicly stated their objections. Mr Osborne has said the rules will have a "perverse effect".
The European Banking Authority, the pan-EU regulator, is considering a crackdown on allowances, saying they may violate the bonus cap. Banks including HSBC, Barclays and Royal Bank of Scotland (RBS) have all used allowances in response to the limit, with RBS especially hobbled by the cap as the Treasury which owns 80pc of the lender voted against allowing it to raise bonuses to 200pc of salaries.
The UK has had little success in overturning EU financial legislation. This year, a legal challenge against a financial transaction tax was thrown out, and the UK failed to have a ban on short-selling betting on share price declines in emergency situations overturned.
A Treasury spokesman said: "Britain has taken a global lead in efforts to tackle unacceptable remuneration practices in the banking sector, which is why we oppose this EU-wide bonus cap, which was rushed through without a proper impact assessment and which could undermine financial stability by leading to higher fixed costs at banks."

[Magda Hassan]

Bakers were happy enough to sacrifice Britain. I don't see they will have any problem in sacrificing the EU if needed. I suppose if they can get the cap over turned it will be a bonus but the show must go on.