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Blow to UK's bankers' 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. | Advocate General Niilo Jääskinen gave an opinion that the EU legislation limiting the ratio was valid. |
The cap on the ratio is designed to reduce incentives for bankers to take excessive risks but critics say it will push up basic pay and banks' costs. | The cap on the ratio is designed to reduce 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." | 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 | Non-binding |
A spokesman for the British Bankers' Association said: "We believe that shareholders should be given powers to determine staff pay - not politicians. That's why banks consult with investors before setting staff pay and shareholders also have the power to vote on the pay of senior bankers. | |
"We believe this law runs counter to recent reforms and will make the system less robust by incentivising firms to increase fixed pay. It also puts European banks at a disadvantage when competing with firms in other parts of the world." | |
The Advocate General's opinion is not legally binding, but the Luxembourg court may consider his reasoning in reaching its verdict. | The Advocate General's opinion is not legally binding, but the Luxembourg court may consider his reasoning in reaching its verdict. |
He rejected all the UK government's legal and technical arguments against the EU legislation. | He rejected all the UK government's legal and technical arguments against the EU legislation. |
A final ruling is not expected until next year. | A final ruling is not expected until next year. |
UK and EU banking regulators have also clashed over attempts by British banks to sidestep the bonus cap by awarding banking executives "allowances", paid alongside salaries to bolster their pay. | UK and EU banking regulators have also clashed over attempts by British banks to sidestep the bonus cap by awarding banking executives "allowances", paid alongside salaries to bolster their pay. |