Brussels, 30/03/2016 (Agence Europe) - The introduction, in 2014, of the bonus cap has shifted the balance in the remuneration of senior banking officials in favour of the fixed part of the salary, the European Banking Authority (EBA) notes in a report published on Wednesday 30 March.
The average ratio between the variable and the fixed part of remuneration paid to senior bank staff earning at least €1 million fell from 317% in 2013 to 127% in 2014, according to the EBA. At the same time, the number of bankers earning seven figures in 2014 increased significantly, rising from 3,178 to 3,865, or an increase of +21.6% (see EUROPE 11384). Unsurprisingly, most of these people were based in the United Kingdom (2,926), the main financial centre of Europe, but also in Germany (242), France (171), Italy (143) and Spain (119).
The reform of bank prudential requirements, which was negotiated tooth and nail between the European Parliament and the Council of the EU, brought in a cap on banking bonuses in the European Union. These may no longer exceed the fixed part of the remuneration, unless the shareholders of the bank agree to an upper limit of up to twice the fixed salary (see EUROPE 10796). This provision was the only financial legislative text the EU approved without the agreement of the United Kingdom, which unsuccessfully brought the matter before the Court of Justice of the EU in 2014 (see EUROPE 11201).
According to the EBA, the bonus cap has had no significant effect on financial stability or the operating costs of banks, contrary to the position defended by the British. In most of the financial institutions, the total fixed remuneration for personnel whose activity has an impact on the risk profile of the business “is still below 5% of administrative costs”, the authority notes.
In addition, the EBA stresses that there is insufficient harmonisation of remuneration practices across the EU. In particular, the application of deferral and pay-out in instruments varied “significantly” across member states and institutions, partly because the states grant derogations once certain criteria have been met (see EUROPE 11430). (Original version in French by Mathieu Bion)