An EU spokeswoman has said that member states have reached a qualified majority agreement on the rules for an EU bank bonus cap that will see bonuses limited to the same amount as base pay (unless shareholders vote to boost the cap to two-times pay). The cap received the support of all EU countries except the UK. While the rules are set to be introduced as early as January 2014, the provisions for bonus limits will impact payouts made only in the following year.
Allister Heath argues that Osborne should have done more to prevent the assault on banker pay:
The new rules will lead to an increase in base pay – they won’t reduce overall compensation. This will dilute the link between pay and performance, make pay shorter-term (as bonuses are inevitably deferred, and base pay is immediate cash), make the banking system riskier by increasing its fixed costs (base pay) and reducing its variable costs (bonuses), lead to much larger sackings in downturns and increase the threat of institutions going bust, make it much harder for UK and European banks to recruit staff in New York, Singapore or Dubai, where they will be competing against players that are not bound by these rules, incentivise Asian and US firms to base more key staff outside London, make it harder to operate global teams, and encourage London based firms with extensive international operations to relocate abroad to mitigate the cap’s impact.