Brussels claims British banks' role-based allowances are in breach of EU bonus cap rules

 
Tim Wallace
Follow Tim
The UK authorities back the banks’ role-based allowances (Source: Getty)
British banks face another nine months of rows with the European authorities and could end up in a fierce legal battle, after the European Bank­ing Authority (EBA) yesterday claimed they were in breach of new EU rules on bonuses.
The UK authorities back the banks’ role-based allowances, which are a new element of pay. They are neither salary nor bonus, but are designed to top up bankers’ fixed pay to compensate for the EU bonus cap.
Otherwise banks would have to hike salaries, reducing the link between performance and pay, and making the industry less flexible in a downturn.
But Brussels yesterday said the allowances were too flexible, and would count as bonuses, or variable pay, rather than fixed pay.
“To be classified as fixed remuneration, these role-based allowances should… be permanent,” the EBA said. Being permanent means the remuneration should be “maintained over a period tied to the specific role and organisational responsibilities for which they are granted; pre-determined, in terms of conditions and amount; non-discretionary, non-revocable and transparent to staff.”
This is only an opinion from the EBA, rather than an enforceable rule.
It will come up with concrete proposals in the coming months before running an open consultation, and then finalising the rules by the middle of next year.
At that stage, the Bank of England’s prudential regulation authority, which is responsible for implementing the rules in the UK, will have either to make the banks comply, or explain to the EU why they should not follow the guidelines.
A source at Barclays said the bank would still have to find ways to pay staff well: “Barclays remains committed to paying competitively and paying for performance.”
RBS and HSBC declined to comment.

Related articles