Chancellor George Osborne today failed to secure backing to water down new EU rules limiting bankers' bonuses, a measure that could threaten London's dominance as a financial centre.
The rules, which would limit bankers' bonuses to the equivalent of their salary, or two times their salary if shareholders agree, are set to be introduced next year and would represent the toughest bonus regime anywhere in the world.
Chancellor George Osborne appealed to EU ministers to change the rules at a meeting in Brussels, arguing that the proposed cap would have a "perverse" effect.
"It will push salaries up, it will make it more difficult to claw back bankers' bonuses when things go wrong, it will make it more difficult to ensure that the banks and the bankers pay when there are mistakes, rather than the taxpayer," said Osborne.
But none of the other 26 EU member states was willing to stand with him, and it looks very unlikely that any significant changes to the rules will be made. Since the rules do not require unanimous backing, Britain has no veto over the proposals.
"The space for further negotiation is quite narrow," said Michael Noonan, the finance minister of Ireland, which as the current holder of the EU's rotating six-month presidency negotiated the deal with the European Parliament.
City A.M. Reporter