Published March 05, 2013
BRUSSELS – Britain's finance minister will have a first chance to challenge plans in Brussels to cap bankers' bonuses at a meeting on Tuesday, but he is unlikely to find enough support from fellow EU ministers to block a measure popular with voters.
European Union 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.
Britain's powerful financial sector professionals fear the rules will put London at a disadvantage and provoke an exodus of major banks and staff to rival financial centers.
Finance Minister George Osborne has argued against the limits and will repeat those objections at an EU ministers' meeting in Brussels. Few other countries, however, support his position, officials familiar with the discussions say, and since the measures only require a weighted majority of member states to become law, Britain has no veto.
An inability to fend off the reform, the first of its kind globally, also underscores Britain's waning influence in the EU and plays to a growing eurosceptic complaint that Brussels has too much say on domestic policy.
Late on Monday, France's finance minister Pierre Moscovici said the deal would not be renegotiated.
"Everyone must live with what is on the table," he told reporters after a meeting of euro zone finance ministers in Brussels. "I told George Osborne, when I was in London, these moral rules apply to everyone, even the City."
A spokesman for Prime Minister David Cameron had earlier said the British government had "real concerns" about the bonus cap plans and that it was discussing the situation with other member states. London Mayor Boris Johnson has dubbed the policy "moronic".
Perhaps the best that Osborne can hope for is that if other parts of the wider bank capital agreement are challenged, he could push back for a softening of pay curbs.
UK ON ITS OWN
Britain could try to push to change the scope of the rules, which will apply to all EU bank staff globally regardless of where they are based, or propose extra flexibility on how bonuses are calculated.
"I don't think it's the end of the story," said one European diplomat. But another diplomat said Britain had little chance of pushing through a change. "Britain is on its own on this," he said.
British members of the European Parliament indicated that they had done as much as they could to accommodate Britain, with concessions such as allowing it flexibility on other elements of the new banking rules, which also cover capital requirements.
"The UK has got all of its other issues delivered on, such as flexibility to apply the retail ring fence (for banks) and many other issues to help the wider economy," Vicky Ford, a British member of the European Parliament who played a role in negotiations, told Reuters. "But we can't have everything."
Ford said the bonus rules had already been changed significantly during negotiations.
On Monday, the Financial Times reported that the city's big banks were weighing a lawsuit against the EU over the new bonus rules.
Officials from one leading British bank said they had no intention of suing and had not sought any such advice on the issue.
"We need to wait until the law has been finally drafted and then look at it, but at this stage it doesn't make sense to sue," one UK bank official said.
A spokesman for AFME, the lobby group representing banks including Deutsche Bank, said "it would not be surprising if legal opinions were being canvassed fairly widely by the industry."
The new rules will not apply to the majority of bank staff, who on average earn bonuses of up to 30 percent of salary, but target senior management and so-called "risk takers", such as traders, whose bonuses can be many times their base salary.
Analysts estimate the law will initially affect around 300 to 500 people in each large bank, or around 5,000 people in London all told.
(Editing by Will Waterman, Bernard Orr)