Bankers who sidestep a cap on their bonuses will face action from the European Union's banking regulator, the bloc's financial services chief said on Tuesday as he fought off calls to toughen up the measure.
The cap is one of the most high-profile rules approved by the 28-country bloc following public anger over high pay at banks, many of which were propped up by taxpayers in the 2007-09 financial crisis.
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The rule, already the toughest curb on bonuses globally, limits them to no more than an employee's fixed salary, or twice that level if approved by the bank's shareholders, and will affect 2014 awards to be handed out early next year.
Some members of the European Parliament accuse banks of skirting the cap by awarding monthly or quarterly "allowances" to boost a banker's fixed pay.
EU financial services commissioner Michel Barnier said the allowances, which he described as a "new category of invented revenue", were being examined by the European Banking Authority (EBA), an EU watchdog.
Britain's HSBC has said it will give new "allowances" - expected to take the form of monthly or quarterly payments in cash or shares - to senior staff to boost their fixed pay, meaning that higher bonuses could then be awarded.
UK peers Lloyds and Barclays have indicated they will follow suit.
"If we note any deviations or sidestepping of the law then ... the EBA needs to assume its responsibility and react," Barnier told the European Parliament's economic affairs committee.
The EU watchdog has the power to require a national regulator to comply with the bloc's banking rules.
Barnier wants parliament to endorse rules the EBA has written to implement the cap and avoid a delay that could mean the rule will not be in place for bonuses awarded next year.
Parliament has the power to veto the rules and effectively force a rewrite.
"I would like it if we could move fast now," Barnier said.
The EBA's rules fully comply with the underlying banking law that parliament and EU states approved, Barnier said.
"I don't think it's legally possible to expand or reduce the scope," he added.
Belgian Green Party lawmaker Philippe Lamberts said bankers in London were doing everything they could to get round the cap and urged the EBA to take a more in-depth look at allowances
He urged Barnier to take Britain to the EU's top court for inadequately applying the bonus cap - the same court the UK has already asked to overturn the cap.
"All options should be on the table ... We don't think it's tough enough," Lamberts said.
Britain argues the cap will make it harder for lenders to cut costs when required because it encourages a higher level of fixed pay. Bonuses, meanwhile, can be cut or withdrawn easily.
Martin Wheatley, chief executive of the Britain's Financial Conduct Authority, which regulates staff at banks, has said the allowances are legal.
The new rules set pan-EU criteria for deciding which "material risk-taking" bankers will have their bonus capped and includes anyone earning more than 500,000 euros a year for the most part.
Parliament will have to vote on any proposal by mid-April, after which it goes into recess ahead of May elections.
(Editing by Matt Scuffham and Pravin Char)