Bankers are set to face a European Union ban on bonuses more than twice fixed pay from next year after lawmakers won a pledge that key risk-takers won’t be able to sidestep the measures.
Members of the European Parliament said they dropped a threat to veto EU standards on how to implement the bonus limits following assurances from Michel Barnier, the EU’s financial services chief, that regulators would police attempts to evade the rules.
“For this reason, we agreed in the end not to object to the regulatory technical standard, as a thorough application of the standard should cover the risk-takers whose bonuses we want to cap,” Othmar Karas, the assembly’s lead legislator on the underlying bonuses rules, said in an e-mailed statement co-signed with two other lawmakers. “However, we will continue monitoring whether banks and supervisors comply with the rules or not,” Karas said.
Lawmakers campaigned for the bonus curbs in a bid to clamp down on the gambling culture they blamed for triggering the 2008 financial crisis. They threatened to block the implementing rules on concerns that some high-earning bankers would be able to dodge the measures if their job description indicates they don’t contribute significantly to the bank’s risk profile.
Barnier said last month that a veto would be an own-goal for lawmakers because it would risk delaying next year’s deadline for the bonus curbs to take effect, handing bankers a “gift.”
“I’m doing my work to clarify the legislation and work with legislators to ensure the rules come into force as quickly as possible, to make sure that bankers don’t get the present of a delay,” he said in an interview in Athens today.
“This rule is there to be applied, to be useful, that’s why I’m ready to make a declaration to clarify the details,” he said.
Lawmakers were concerned about loopholes for bankers earning between 500,000 euros ($690,000) and 750,000 euros, amid concerns that exemptions for such staff would be insufficiently scrutinized.
Barnier deflected these criticisms by making assurances that regulators must be notified before exemptions are applied to such employees, according to the statement.
“In any case, the competent authority must intervene if it considers the remuneration unjustified or doubtful,” the lawmakers said.
The European Commission, of which Barnier is a member, last month published the draft technical standards designed to determine which bank employees should be considered “material risk-takers,” and so face the bonus limit.
The parliament and national governments are allowed to scrutinize and reject the commission’s approach.
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