EU rejects Osborne’s bank bonus cap challenge

The UK government’s challenge to the European Union’s cap on bankers’ bonuses has been throw out by the advocate general.

Canary wharf ncrj

The UK government’s challenge to the European Union’s cap on bankers’ bonuses has been throw out by the advocate general.

The EU law limits a bonus to no more than a banker’s fixed pay or twice that level with shareholder approval.

Advocate general Niilo Jääskinen today ruled that EU legislation limiting bankers’ bonuses is valid.

Earlier this year the European Court of Justice announced that the UK had failed in its legal challenge to prevent 11 EU Member States – including France, Germany, Italy and Spain – introducing a Financial Transaction Tax across shares, bonds and derivatives.

A recent survey found that nearly half (49 per cent) of British bankers reported higher bonuses this year, compared with 47 per cent in the US and Hong Kong. The average bankers’ bonus globally was 29 per cent higher in 2014 than a year ago.

The government had previously claimed that restricting bankers’ bonuses would damage Britain’s competitiveness.

Responding to the advocate general’s ruling, Luke Hildyard of the High Pay Centre told Left Foot Forward:

“Many people will find it striking that the government was in court, spending taxpayers’ money to defend bankers’ seven figure bonuses in the immediate aftermath of yet another banking scandal, this time relating to foreign exchange markets. It sends totally the wrong message about priorities.

“Despite the banking industry’s bleating, there is little evidence that cutting bankers’ ludicrous pay packages will hurt them. The head of UK Finance and Investments, which manages the taxpayers’ stake in bailed-out banks, recently said that the bonus cap had had no material impact on competitiveness at RBS.”

10 Responses to “EU rejects Osborne’s bank bonus cap challenge”

  1. Foullaini

    Osborne seems to have forgotten we’re not a sovereign country.

  2. Matthew Cruickshank

    Where big finance is involved, nobody really has any sovereignity..

  3. Selohesra

    If anyone thinks for one minute this will reduce bankers’ total compensation they are deluded. Ways around will soon be found including huge increases to basic salary – which has added problem of being harder to reduce in bad years.

  4. Mike Stallard

    Wrong enemy! Yes, the banks are full of greedy people who confuse London with Vegas. We all know about that.
    The problem is the EU plutocrats who decide what is good for a fringe country on the borders of Europe, far away from their own banking system in Frankfurt and the ECB and the IMF.
    They really do not care if our banks fail to provide the money for the welfare state. They really don’t.

  5. blarg1987

    You may be partially right, however the underlying problem, is performance related pay. This has led to a culture of people bending even breaking rules to get a bonus at any cost hence people being miss sold products and services from door salesmen and and collapse of the financial system.

    If this cap means higher salaries that reflect in a change in banking behaviour then that can only be a good thing.

    What will be interesting know will be the governments response if it rejects the EU legislation then it will torpedo the governments argument of not being able to do certain things because of “EU law” .

  6. Guest

    No surprise you’re for unlimited bonuses.

    YOU don’t care about the welfare state, it’s pretty clear.

  7. Guest

    You seem to be denying the treaties the UK is voluntarily a part of, as a sovereign country.

  8. Mike Stallard

    Don’t feed the trolls.

  9. Brendan Caffrey

    Pay Inequality: What to do?

    Bank bonuses can now be a maximum of 100% of annual pay, or
    200% if shareholders agree. The
    Chancellor of the Exchequer’s attempt to have this European Union regulation
    set aside has just failed. There is now an attempt to simply increase annual
    salaries of directors, with “allowances”. These “allowances” are paid in
    addition to basic salary and bonuses. The European Union has just ruled that these “allowances” are in
    breach of the bonus size regulation. This is no surprise!

    The simplest way to get around these regulations would be to
    increase basic salaries. But this would make pay “packages” simpler to
    understand, as there would be no bonuses and no “allowances”. Further, the
    distance between the lowest paid bank workers and the highest paid directors
    would become more transparent. All this might increase popular and political
    objections to the exorbitant pay levels of those at the top of the banking
    industry.

    In 1997 chief executives in the FTSE 100 were paid 47 times
    their average employee. In 2012 this rose to 133 times the average employee.
    Given the average wage is now around £25,000.00; this produces a figure of over £3.3 million per annum for the chief
    executives. How can this distance of 133 from the top pay to the bottom be
    reduced?

    Some relationship between pay increases at the top, and
    those at the bottom, needs to be introduced. This could take many possible forms.
    Say a figure of 5% was an annual increase at the top; then a similar 5% should
    be added to the bottom. This might stabilise the 133 relationship between the
    top and the bottom. Pay increases at the bottom of 5% would, however, be well
    above inflation and very welcome. But the distance from top to bottom would not
    change very much.

    A more effective possibility would be where companies award
    directors a bonus of 200% of basic salary, with shareholders support, then those
    at the bottom should get double their previous increase. If the previous
    increase was say 5% , then it would rise to 10% of basic pay. The previous stable
    relationship of 133 to1would now be lost. This might create a fear of inflation
    as well. But there might be an increase in the perception of this system as more
    fair.

    More radical options include pay freezes. Pay freezes for
    all; or pay freezes only at the top, to allow the 133 to 1 relation to progressively
    fall over time. Or where bonuses of some sort still exist, replace percentage
    rises with sums of money. These sums could be defined variously as related to length
    of service; to between 3 and 6 months pay; to one’s position in a company
    hierarchy; to be being set by a remuneration committee for all employees, with
    union representation on all such committees.

    None of the above schemes radically reduces the figure of
    133. Indeed, 133 could rise. Further, none have any chance of implementation
    without popular support, and political will. A final objection is that those on
    low pay and zero hour contracts would become even more attractive to companies.

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    whyworktoday2967.wordpress.com

  10. Guest

    Don’t stop eating over this, it’s not worth it over internet postings!

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