European regulators are planning tougher than expected rules on bankers’ pay despite concerns from officials that it could make the European Union (EU) uncompetitive.
The Committee of European Banking Supervisors has been meeting in London to implement the rules agreed by the EU over the summer. Discussions concluded yesterday and draft regulations are set to be issued in days, according to the Financial Times.
The rules are set to have a heavy impact on banks with global operations as they would apply to the worldwide operations of EU based banks and the European subsidiaries of any non-EU banks. Officials says this would make the EU uncompetitive in comparison to America and Asia.
There is also plans to link bonuses to any individuals base pay as the draft regulations ask banks to set a formula determining the maximum share of total compensation made up by bonuses. It is believed this will lead to a major shake in pay at a number of investment banks. (article continues below)
The EU directive already calls for up to 60% of bonuses to be deferred over three years and draft regulations specify any payments must be capped at 20% of the total bonus of the biggest earners.
Although the EU directive states that pay rules apply to the top management and “risk takers”, regulators may also require a floor where the restrictions become active. The Financial Services Authority code currently applies for people earning over £500,000.