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.

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.”

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