European Union rules limiting remuneration of bankers and financial firms’ staff may be too costly for smaller companies and could be reviewed, the European Commission said on Thursday, in a move that addresses concerns raised by banks.
The rules were adopted in the aftermath of the 2007-08 financial crisis in response to public outcry at bankers pocketing large bonuses after taxpayers had contributed to the bailout of several lenders in Europe.
Bankers and investment firms, especially in the City of London, complained that the rules would limit their ability to attract talent and would increase red tape.
The Commission, which has the power to propose and amend EU legislation, said on Thursday that the new provisions have been “effective in curbing excessive risk-taking behaviour and short-termism”, but added that “in certain cases, some of the rules may be too costly and burdensome to apply.”
“Our evaluation shows that there may be room to make remuneration rules more proportionate and less burdensome from an administrative perspective, in particular for smaller and less complex credit institutions and investment firms,” the commissioner responsible for pay policies Vera Jourova said, confirming earlier announcements.
Before proposing any changes, Brussels will conduct a study to assess more thoroughly the impact of bonus rules. Proposals may come in November, when the Commission plans to review rules on banks’ capital requirements.
Brussels will look at a possible review of rules concerning staff with low levels of variable remunerations and requirements on deferral and pay-outs instruments in smaller investment firms.
The Commission did not address the wider issue of caps, a measure loathed by banks, which limit bonuses to no more than fixed pay or twice that amount with shareholder approval.
Brussels said that it is too early to assess the impact of this measure as it was introduced only in 2014.
In March the European Banking Authority, the bloc’s banking watchdog, said caps on banker bonuses did not undermine financial stability and did not limit lenders’ ability to control costs.
Source: Reuters (Reporting by Francesco Guarascio)