Business World

Saturday 7 December 2019

Regulators to explain rules on bank bonuses

Ben Moshinsky and Nandini Sukumar

EUROPEAN Union financial regulators will seek to clear up confusion about how much cash bankers can receive as part of their bonuses at meetings in London today.

The Committee of European Banking Supervisors (CEBS) will host a meeting with regulators from the 27 EU nations. In addition to bonus rules, the financial watchdogs will also discuss capital ratios for lenders, according to a person with knowledge of the agenda.

The UK Financial Services Authority (FSA) is looking to CEBS to determine how to implement rules on the amount of cash in banker bonuses.

FSA proposals in July are consistent with EU rules that limit the cash portion of bonuses to 30pc, "but we have made clear that it's provisional because other interpretations are also possible," said Heidi Ashley, an FSA spokeswoman.

David Buik, a market analyst at inter-dealer broker BGC Partners in London, said: "It's good of the FSA to push for 50pc, but maybe a 30pc cap is needed to put this matter to bed."


The EU is implementing rules on bonuses as part of a range of measures to rein in risk-taking that is blamed for causing the global financial crisis.

The FSA proposed rules that require at least 40pc of bonuses to be deferred for no less than three years and at least 50pc to be paid in shares.

"I don't see why small private companies or ones that are not credit-exposed and take no risk on their books -- like us -- should fall under the same rules," said Alasdair Haynes, chief executive officer of Chi-X Europe Ltd, Europe's biggest alternative-trading system.

"If there's no credit risk, you should be able to reward people as you wish. That's meritocracy."

Richard Balarkas, chief executive officer of the Instinet Europe Ltd brokerage, said the strict bonus rules might drive lenders into non-EU countries.

"If I'm a highly rated analyst, I don't understand why I'd sit in an investment bank in a highly regulated environment, where I am now personally liable for all kinds of things, in a tax regime where I give the government half of what I earn."

In addition to the bonus rules, the regulators will also discuss the effect of rules -- adopted by global regulators at the Basel Committee on Banking Supervision on the economy -- on how much capital banks will have to set aside. (Bloomberg)

Irish Independent

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