RBS takes hard line on new EU bonus attack

BRITAIN’S banks are at odds over how to tackle a harsh new crackdown on bonuses proposed by MEPs, with taxpayer-owned RBS most keen to take a strong stance against the bonus curbs.

It is understood that RBS has made the case for intervening promptly to head off an amendment tabled by Austrian MEP Othmar Karas. The proposal would limit the pay of those at the top to a maximum of 30 times that of pay at the bottom and would require bonuses to be worth no more than twice basic salary.

Although banks expect the final amendment to drop the high to low pay ratio, they still view the 200 per cent proposal with horror. A private briefing paper shared by banks says it “would leave us in an extremely uncompetitive position [and] is likely to lead to an increase in fixed compensation”. It adds: “We strongly oppose this proposal [for a bonus-salary ratio limit] in any format.”

Despite being 83 per cent publicly owned, RBS has sided with the stronger stance taken by American investment banks, saying that British banks should engage swiftly to explain to lawmakers why such a proposal would wreck their businesses.

HSBC and Standard Chartered, by contrast, believe it is wiser to take a softer approach and wait. One banking source said of the US banks’ aggression: “They could well make it worse.”

Meanwhile, City A.M. understands that the Treasury is dismissive of the threat, believing the MEPs’ bonus amendment will be dropped. It is concentrating instead on the details the capital and liquidity rules.

Banks are also fretting over MEPs’ suggestion that they publish the job description of everyone whose pay is over €1m, saying “this will not be an anonymous disclosure if this level of detail is provided”.

Among the other proposals is a plan to limit pay to three times the salary of member states’ head of government, which banks say has “no logical basis”.

The banks declined to comment.