European Banks at Disadvantage to U.S. Peers on Pay, Mercer Says

Europe’s “onerous” caps on banker bonuses are putting the region’s firms at a disadvantage to their peers in the U.S. and emerging markets when hiring outside their home market, according to a survey by Mercer LLC.

Three out of four firms polled said European Union rules capping banker bonuses at no more than twice fixed pay have created an “un-level playing field,” the human-resources consultant said in an e-mailed statement today. Only 22 percent said the rules benefitted their firms, Mercer said, citing the April survey of 78 firms including BNP Paribas SA, UBS AG, HSBC Holdings Plc, Credit Suisse Group AG and Deutsche Bank AG.

The EU introduced the restrictions in February to limit excessive pay-outs and curb irresponsible risk taking after the industry received a taxpayer rescue in 2008. The rules may trigger an increase of 500 million pounds ($761 million) in bankers’ total base salaries, Andrew Bailey, Britain’s chief banking supervisor, said in March.

“The clearest trend in the face of bonus caps is an increase in base salaries,” said Vicki Elliott, senior partner at Mercer, said in the statement. “With less variable pay that can be linked to performance, there will also be less pay that can be deferred and aligned with the risk time horizon of the business.”

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