BOE Seeks More Details on Banker Pay as EU Readies RulesBen Moshinsky
The U.K.’s biggest banks will have to submit detailed reports on how they pay their highest earners as the European Union’s top banking regulator readies updated bonus rules to take account of so-called allowances.
The Bank of England will start collecting data on pay structures, including severance packages, cash bonuses and any guaranteed payments to new employees, from the 15 biggest banks and building societies. It will also require banks to provide more information on staff roles and responsibilities.
The data will enable “more accurate judgments to be made about the alignment between risk and reward in firms,” the central bank said in a consultation paper on its website today, advancing its “objective to promote the safety and soundness of firms.”
The new requirements build on EU rules that already require banks to submit data on the number of employees earning more than 1 million euros ($1.3 million) for an annual report to be compiled by the European Banking Authority. The most recent report found that Britain was home to 2,188 investment bankers earning more than 1 million euros in 2012, the most in the EU, while Spain had 37, according to the EBA data.
Bankers in the 28-nation EU already face the toughest bonus standards in the world. EU lawmakers last year backed a cap on bonuses in a bid to clamp down on the gambling culture they blamed for triggering the 2008 financial crisis.
Some lenders with U.K. operations responded by giving employees cash allowances depending on seniority, known as role-based pay, to evade the restrictions. Banks consider these allowances as part of salary and so not affected by bonus caps.
The EBA, which was set up in 2011 to standardize banking rules across the EU, said earlier this year it may restrict such role-based payouts for senior bankers, citing “concerns that these practices do not conform to the requirements” set out in the rules capping bonuses, the EBA said in a report.
EU member states must submit data “in the new template format” to the EBA by Nov. 30 for the 2013 performance year, according to today’s paper.