EU refuses to budge on bonus cap for bankers despite UK's objection
Finance Minister Michael Noonan says there's little scope for amending agreed deal
THE European Union will not make any major changes to its plan to cap the size of bonuses for bankers despite pressure from Britain, as it moves closer to implementing new bank capital requirements.
EU diplomats and the bloc's parliament agreed new rules last week that would prevent bankers from receiving bonuses bigger than their base salaries from next year. The bonus cap can rise to twice the size of the salary if shareholders agree.
As the current president of the EU, Ireland played a key role in negotiating the deal.
EU finance ministers agreed to press ahead with the plan, and will hold "technical discussions" on how it will be put into operation over the next fortnight.
Assuming all goes according to plan, the rules should come into force next January, although a number of states have asked for a longer lead-in time.
Britain, however, is the only one of the 27 countries opposing the cap on bonuses, which is part of a wider scheme on bank capital requirements, known as "CRD4".
British Chancellor George Osborne said the move would only encourage more reckless practice from lenders, while firms would move jobs from Europe to avoid the cap.
"Our concern is . . . it may undermine responsibility in the banking system rather than promote it," he said.
"We are the first to support stronger rules on bonuses, more transparency, more linking of bonuses to long-term performance, more ability to claw back bonuses when bankers make mistakes to make sure they are punished rather than taxpayers.
"We have concerns that in some aspects the proposals will undermine that. It will push salaries up, it actually makes it harder to claw back bankers' bonuses when things go wrong, and it will make it more difficult to make sure that the banks pay when they make mistakes rather than the taxpayer," he added.
Finance Minister Michael Noonan said, however, that there was little scope for amending the bonus rules, and the EU's commissioner on internal market affairs, Michel Barnier, was emphatic when asked about the possibility of concessions on the matter.
"It is crystal clear (that there will be no more concessions)," he said.
British banks are reportedly considering legal action over the bonus cap, but Mr Barnier "didn't see a basis" for such a move to be successful.
Despite the British opposition to a deal, some officials believe the plan as it is doesn't go far enough.
Dutch Finance Minister Jeroen Dijsselbloem, who also heads the eurogroup of eurozone finance ministers, supports the bonus cap at 100pc of salary, but at home is implementing a cap of 20pc.
Meanwhile, European parliament president Martin Schulz said he "deeply regretted" that ministers did not vote on the plan yesterday, but Mr Noonan, who chaired the meeting, said it had achieved everything it was required to.
Ireland is now drawing up the text of the capital rules with the aim of agreeing legislation by the summer. The bill must be approved by a weighted majority of EU states and the parliament.
German finance minister Wolfgang Schauble called for further technical discussions to make the plan more palatable to Britain and avoid a scenario whereby the legislation would pass without unanimous support.