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EU rejects UK's bonus cap challenge | EU rejects UK's bonus cap challenge |
(35 minutes later) | |
The Advocate General of the EU Court of Justice has rejected the UK's challenge to its cap on bankers' bonuses. | The Advocate General of the EU Court of Justice has rejected the UK's challenge to its cap on bankers' bonuses. |
The cap restricts bonuses to 100% of banker's pay or 200% with shareholder approval. | The cap restricts bonuses to 100% of banker's pay or 200% with shareholder approval. |
Advocate General Niilo Jääskinen gave an opinion that the EU legislation limiting the ratio was valid. | |
The cap is designed to reduce the incentives for bankers to take excessive risks but critics say it will push up basic pay and banks' costs. | |
The UK government challenged the legislation asking the Court of Justice in Luxembourg to consider six arguments challenging both the scope and the legal basis for the new rules. | The UK government challenged the legislation asking the Court of Justice in Luxembourg to consider six arguments challenging both the scope and the legal basis for the new rules. |
Advocate General Jääskinen said: "Fixing the ratio of variable remuneration to basic salaries does not equate to a 'cap on bankers bonuses', or fixing the level of pay, because there is no limit imposed on the basic salaries that the bonuses are pegged against." | |
Non-binding | |
The Advocate General's opinion is not legally binding, but the Luxembourg court may consider his reasoning in reaching its verdict. | |
A final ruling is not expected until next year. | |
The UK argued that big basic salaries would be more difficult to cut when the business climate deteriorates. | |
It also said the new rules may persuade bankers to relocate outside Europe. | It also said the new rules may persuade bankers to relocate outside Europe. |