Brussels, 26/09/2013 (Agence Europe) - On Wednesday 25 September, EU Internal Market Commissioner Michel Barnier said: “I am not surprised that the UK has decided to bring this issue in front of the Court, having been the only Member State to object to the rules in the framework of CRD 4,” (see EUROPE 10828). He was referring to the UK taking the bank bonus cap to the European Court of Justice.
“I continue to believe that a tough framework for bonuses is necessary to ensure financial stability and that the legal basis chosen is solid, and it was indeed confirmed as such by our legal services,” explained Barnier, adding: “I would also like to recall that a cap on bonuses is one measure amongst many in the framework for bonuses and other measures are equally important to ensure that pay does not encourage excessive risk taking which puts banks and the wider economy in peril (e.g. deferred payments of bonuses, ratio between fixed and variable part of pay, ratio between cash and shares etc). And above all, our intention has been to ensure that it is the shareholders who assume their responsibilities and play the determining role when it comes to the remuneration packages for risk takers in bank.”
Criticising the British move as an “obvious political manoeuvre without substance,” Othmar Karas (EPP, Austria), European Parliament rapporteur on this issue, added: “The British never came up with these arguments in the months-long negotiations. That they come now, is late and easy to see through.” He went on: “The lawsuit filed by the British government is an attempt to obstruct the necessary change in culture on financial markets, which the European Parliament initiated and will pursue.” The new bank rules say that bonuses may not exceed fixed pay, except where a majority of shareholders say that it can be double fixed pay as long as at least 25% of the bonuses is in convertible capital that cannot be cashed in for at least five years. The new rules also apply to non-EU banks registered in the EU and EU banks registered outside the EU.
The United Kingdom is challenging the legal basis of the bonus cap, its erroneous application outside the EU and its potential negative impact on data protection. The court case will not prevent the new rules coming into force in January 2014. (MB/transl.fl)