German Finance Minister Wolfgang Schaeuble’s proposal for a ban on upfront cash bonuses that exceed bankers’ fixed salaries will be explored by European Union lawmakers and governments seeking an accord on pay rules.
Michel Barnier, the EU’s financial services chief, has welcomed Schaeuble’s plan and would like it to be part of negotiations on a draft EU bank law, according to an EU official who declined to be identified because the discussions are private. Lawmakers in the European Parliament have insisted that the law include a general ban on bonus awards exceeding fixed salaries -- a stance rejected by some governments.
“There will be no agreement without a limitation of bankers’ bonuses,” Othmar Karas, the parliament lawmaker leading work on the draft law said in an e-mailed statement. Karas said he hoped a deal would be reached in the “next few days.” Negotiations are entering a “decisive phase,” Karas said.
Bankers are facing a backlash from the European Parliament, which is 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. and Barclays Plc, to retreat from their initial pay plans.
The parliament’s push for binding curbs has become a sticking point in negotiations on the draft bank capital law, which the EU is seeking to settle by Jan. 1, 2013.
Lawmakers in the assembly last week rejected an attempt by Barnier to broker a compromise that would have left it up to shareholders to set pay limits.
Schaeuble’s plan, outlined in a piece he wrote last week in the Financial Times, would outlaw immediate cash bonuses that are greater than bankers’ fixed pay, while leaving it to shareholders to decide on the deferred part of pay awards.
Parliament lawmakers and officials from Cyprus, which holds the rotating presidency of the EU, will hold a next round of negotiations on the draft law on Sept. 5.