Bankers’ bonuses across the European Union are set to be limited by law, with many bank lobbyists admitting in private that they have lost the fight against a European Parliament initiative to limit the size of bonuses relative to salary.
Some banks still hope to increase the proposed ratio from 1:1 to 2:1 or beyond, while others are trying to limit the restriction to upfront cash bonuses, excluding deferred payouts. But many bankers now accept the principle of a ratio as inevitable.
“It’s dawning on many banks that this is game over,” said one senior lobbyist. “Many are now resigned to the 1:1 ratio.”
The European Parliament, reflecting continued public anger over bankers’ pay levels at a time of austerity, has taken an unusually aggressive stance in pushing through the proposal, inserted into a draft law on capital rules for financial institutions in April.
The rules, as currently planned, would apply to senior staff working for EU-based banks anywhere in the world as well as to EU-based staff of US and Asian banks. They would cover all forms of bonus, including so-called long-term incentive plans for senior staff, proving disruptive to highly paid bank chief executives such as Barclays’ Bob Diamond, as well as top-ranking traders.
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