European Union bonus rules that ban awards of more than twice fixed pay may not be applied to small investment firms monitored by the U.K. markets regulator.
The U.K. Financial Conduct Authority said in proposals today on new capital rules it won’t seek to impose tougher measures than the basic standards set out by the EU, which could see all firms under its supervision exempt from the bonus curbs.
Companies probably exempt from the bonus caps either hold assets below 15 billion pounds ($24 billion) or invest in a limited range of asset classes, the regulator said. Larger investment banks, such as Barclays Plc (BARC), are regulated by the Prudential Regulation Authority and will have to adhere to the compensation caps.
“We have taken the view that the principle of proportionality would also apply to the limits on bonuses,” the FCA said. “This means that investment firms could potentially be excluded from its application based on their size, internal organization and the nature, the scope and the complexity of their activities.”
The U.K. government was defeated earlier this year when it sought to thwart a bid by EU Parliament lawmakers to add the bonus curbs to a draft law overhauling bank capital rules. The U.K. last month sued to block the measures that it said breached treaties protecting the “rights and interests of employed persons.”
The EU bank capital law is set to begin phasing in next year, with the bonus rules to apply for the first time to awards given in 2015, based on 2014 performance.
The FCA warned earlier this year that the EU plans were “designed more with banks in mind,” and could cause a leap in smaller firms compliance costs.
The regulator said it would seek views on the measures until Nov. 10
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