Britain could face legal trouble over failure to cap bankers bonuses

The European Banking Authority (EBA), the bloc’s watchdog, published revisions to its existing guidelines which were overtaken by the EU law on capping banker bonuses.

That cap limits bonuses to no more than twice fixed salary.

Most of the bankers hit by the cap are based in London and the EBA said in October that “allowances” paid by 39 banks in six countries to boost fixed pay, and hence soften the bonus cap, breach EU rules.

“The paper is very black and white, it does not make allowances for the 50 shades of grey necessary for a firm’s remuneration policy to work in practice,” said Anna McCaffrey, senior associate at Taylor Wessing lawfirm.

The revised 119-page guidelines, put out to consultation for three months, will come into force by the end of this year.

They require Britain and other EU states to apply the rules bonuses paid from early 2016, or explain publicly why not.

Under the rules, if the watchdog felt an explanation not to comply was without merit, it could “name and shame” the national regulator. The EU could even take the member state to the bloc’s top court, which has powers to levy fines, though some lawyers said such a drastic step was highly unlikely.

Britain opposed the bonus cap, saying it would lead to banks bumping up fixed pay, and UK regulators have said it was too late to stop allowances affecting the current bonus season.

Bankers say the revised EBA guidelines will force banks in London to rewrite many contracts for allowances.