European Union lawmakers said they will fight proposals from EU Financial Services Commissioner Michel Barnier that would water down legislation capping banker bonuses.
European Parliament members have until the end of the week to respond to Barnier’s compromises, which would weaken a ban they approved in May on bonuses larger than bankers (SX7P)’ fixed pay, Sharon Bowles, chairwoman of the assembly’s economic and monetary affairs committee, said in an interview.
“I’m not expecting there has been a big change of views” on the need for the curbs, Bowles said. Philippe Lamberts, the lawmaker leading the work on the measures for the parliament’s Green group, said in an Aug. 27 interview that he would be “amazed” if the assembly backed down.
Bankers are facing a backlash from EU lawmakers determined to cut variable pay as part of a quest to reshape lenders as utilities rather than money-making machines. The regulatory push comes as public outrage and shareholder rebellions this year forced some banks, including Citigroup Inc. (C) and Barclays Plc (BARC), to retreat from their initial pay plans.
The cap, part of draft legislation implementing capital levels called for by the Basel Committee on Banking Supervision, has become a sticking point in the assembly’s negotiations with national governments ahead of global regulators’ deadline of Jan. 1, 2013, to implement the rules.
As an alternative to Parliament’s plan for a bonus cap, Barnier said in June that shareholders should have to vote on the ratio between fixed and variable pay.
“The commission thinks that making shareholders responsible for remuneration is a way forward in the current negotiations,” Stefaan De Rynck, Barnier’s spokesman, said in an e-mail today.
Barnier “is personally not against a cap but has proposed empowering shareholders in a spirit of compromise,” De Rynck said. “We now need to decide rapidly on the outstanding questions” in the draft law.
Commission officials and representatives of Cyprus, which holds the rotating presidency of the EU, are scheduled to meet with lawmakers to discuss the proposals Sept. 5.
Lawmakers are still likely to give ground on the bonus curbs in the final version of the Basel law, Richard Reid, research director for the London-based International Centre for Financial Regulation, said in an e-mail.
Experience with other regulation shows that imposing “a single or simple solution to very complex and varied situations is very difficult and of course may ultimately prove almost impossible to enforce,” Reid said.
“This problem will have to be recognized with regards to bankers’ bonuses,” Reid said. “Some kind of compromise will have to be found.”
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