BANKERS in Europe will have one final bonus season before they are barred from awarding themselves payouts worth more than their salary, EU lawmakers agreed last night, paving the way for the first cap of its kind globally.
The cap is designed to address public anger at a bonus-driven culture many European politicians believe encouraged the risk-taking that led to the near-collapse of many of the region’s biggest banks.
The law will be effective January 2014 but will only apply to bonuses paid in 2015. A special provision to recognise that bonuses are paid on the previous year’s work means bankers who collect payouts next February and March will not be affected.
The cap has already been softened to allow banks to pay up to a quarter of a banker’s bonus in share options, bonds or other non-cash payments which attract a premium after five years.
Payments made after more than five years would qualify for a bigger discount when calculating the size of the bonus.
The rules, part of a wider capital regime for banks, allow bonuses of twice bankers’ salary if shareholders agree. They represent the toughest bonus regime anywhere in the world.
The cap will be introduced despite objections from Britain and the next step, an endorsement by EU states, is a formality.
The rules raise the risk that some top UK bankers could relocate to financial centres outside the EU.
City A.M. Reporter