EU unveils bank bonus rules

10th Dec 2010 15:31

European Union banking supervisors have unveiled their final guidelines for controlling bankers' pay and bonuses, with few changes from the tough-talking original draft in October.The guidelines are part of the EU's drive to bring bonus payments into line with the risks bankers' are taking and will mean they have to wait at least three years to get the bulk of any payout.The core of the proposals remains unchanged. A minimum portion of 40% to 60% of variable pay must be deferred over three to five years with at least half in shares.It means only 20-30% of bonuses will be paid in cash up front. The bonus limits will apply to the entire global staff of European banks and also staff in Europe working for non-European banks.That upfront payment will also be taxed in the country where the employee works.Reports this morning had suggested CEBS might have proposed a maximum ratio between fixed and variable pay to come into force across the EU, but the supervisors reiterated it was up to the banks themselves to apply the "appropriate balance."Banks have complained the rules could spark a rush of staff to Asia, where the rules are lighter. Standard Chartered and HSBC, both of which has significant Asian operations, have already talked about the difficulties of retaining Asian staff."CEBS announcement, on top of the FSA rules, changes dramatically the bonus landscape," bank lobby group the BBA said today. "Taken together, these rules mean that for the key people, whatever is paid in bonus is half in shares, mostly locked away for several years, and any cash will go straight to the taxman. This represents a huge change away from the bonus arrangements of the past," it added.Other CEBS' recommendations include setting up an independent remuneration committee, ending "award for failure" severance pay packages and pay details for "senior management and risk takers" to be made public.