European Union officials will next week propose capping financial sector pay awards above E500,000 (£422,000), accountancy firm PwC said on Friday, suggesting the world’s most stringent curbs will affect far more bankers than previous rules.
The European Banking Authority will reveal next week for the first time the level of its planned bonus cap. It justifies it as a way of recouping the billions in help banks received from governments and central banks to stay afloat in the crisis and to stop cash going back into the pockets of people accused of creating the crash through excessive risk-taking once balance sheets recover.
But Peter Snowdon, a financial services lawyer at Norton Rose in London, said clients had already been calling him up to ask about the implications and said it would have “significant implications for European business”.
Jon Terry, a partner at PwC, said the E500,000 threshold would increase the number of staff subject to bonus capping by as much as 10 times for some investment banks operating in London in comparison with current UK rules.
“This will create a major challenge for banks as to how they reward their staff,” Mr Terry said.
At Barclays where 1,338 staff were paid £500,000 or more last year according to the bank’s annual report for 2012, at least three times as many people would be caught out than under previous definitions of “code staff”.
In March the EU approved a new law barring bankers from awarding themselves payouts worth more than their salary, by far the world’s most stringent curb on financial sector pay.