EU financial services commissioner, Michel Barnier, has told the British Bankers Association that a cap on bonuses will help ensure stability in the financial sector and that the proposal is legally sound. Barnier told the industry group
I remain confident that the measures are balanced and reasonable, in the interests of financial stability. And that our legal basis is the right one.
Britain is challenging the EU's plan, which includes limiting bonuses to fixed pay from 2014, a limit which can be doubled with shareholder approval. Britain has raised concerns that cap will see banks push up base pay, and will make Europe uncompetitive in the field of financial services.
British politicians and regulators have argued the cap will increase rather than decrease risk in the financial sector. A cap on bonuses will deny banks the flexibility to cut pay in the midst of an economic downturn. There has been vocal oppostion to move as an over-reach of EU power.
London MEP Syed Kamal argued the EU should not have the authority to set bankers pay:
This is not a question of whether or not people deserve bonuses, but of whether eurocrats should be allowed to dictate to our companies how they reward their staff.