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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 ruled the EU legislation limiting the ratio was valid. 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. 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.
"Not a cap" 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."
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
However, the UK argued that big basic salaries would be more difficult to cut when the business climate deteriorates. 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.