EU seeks cap on bankers' bonuses
The proposed bonus cap could hit top earners among London's 144,000 bank staff.
The European Parliament and EU states could agree to impose caps on bankers' bonuses today, a measure that would channel public fury at financial sector greed.
Negotiations to introduce a cap on bankers' bonuses in the European Union resume, a week after European politicians and ambassadors from countries failed to reach a deal.
A majority of European states would have to support a measure passed by the European parliament to make it law.
Limits to bankers' pay are popular as the region struggles to emerge from the ruins of a 2008 financial crisis. Lavish pay is blamed for encouraging bankers to take excessive risks, destabilising banks that then needed to be bailed out.
Banks and industry lobbyists have strongly resisted bonus caps. They say such limits would only force banks to hike base pay to keep staff, making wage bills less flexible.
Britain in particular is wary of any measure that might hurt the City of London, the continent's financial capital, with 144,000 banking staff and many more in related jobs.
But European lawmakers see a cap - possibly limiting bonuses to double base salary - as the only way to rein in runaway pay, reduce incentives for risk and make banks safer.
"A cap is the only way we will see bonus restraint," said British MEP Arlene McCarthy, who pushed for pay reform. "The parliament is not prepared to budge. Legislators have got fed up because they don't see any restraint in the bonus culture", she added.
Talks between EU country ambassadors about the rules broke up last week amid clashes over how far to go, but tougher rules seem certain.
Britain is anxious to protect the sector, which accounts for one tenth of its economy, and is trying to dilute the impact of the cap with proposals that would allow higher bonuses if they were paid in share options.
Nearly 700,000 people work in financial and professional services in London. Many in banking argue that such reform will do little to lower pay in finance, where head-hunters say some annual packages in London approach five million pounds.
Hedge funds and private equity firms will be excluded from such curbs although they face restrictions on pay later this year under another EU law.