EU warns banks of possible action over the payment of allowances

Banks use of allowances to soften a European Union cap on bonuses could face a “coordinated policy response”, the EU’s financial services chief Michel Barnier warned, prompting bankers to argue politicians should steer clear of pay.

The EU imposed controls on banker bonuses, blamed for encouraging risk-taking by staff whose pay was linked to their revenue-generating record, after taxpayers were forced to shore up lenders whose shaky finances were suddenly exposed in the financial crisis.

The controls limit payouts to the equivalent of an employee’s fixed salary, or twice that amount with shareholder approval.