Regulators to investigate whether firms avoiding pay curbs are breaching rules

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Bonus curb workarounds being developed by banks from HSBC to Lloyds Banking Group will be scrutinized by European Union regulators for possible breaches of the bloc’s rules.

Bloomberg News reports that banker pay limits approved by the EU last year that ban bonuses worth more than twice fixed pay are being put to the test by new remuneration structures at lenders.

The approach pioneered by some U.K. banks entails paying staff partly through “allowances” that can vary year to year, and that aren’t counted as variable pay.

'We’ll have new guidelines that we’ll issue by the end of this year that will also provide a framework for the treatment of this kind of pay', Andrea Enria, chairman of the European Banking Authority, said in an interview in Helsinki. 'We’re not a supervisor, so we don’t have sanctions that we can levy on individual banks. What we’ll do is we’ll monitor how the law is applied, and if it is not, the course of action is to open a breach of law investigation'.

Lawmakers campaigned for the bonus curbs in a bid to clamp down on the culture they blamed for triggering the 2008 financial crisis. The ban on bonuses of more than twice fixed pay is set to take effect next year. Michel Barnier, the EU’s financial-services chief, has cited the emerging practice of banks granting allowances to staff as a cause for concern. In addition to HSBC and Lloyds, Barclays and others have announced plans to introduce allowances.

To access the complete Bloomberg News article hit the link below:

HSBC to Lloyds Banker Bonus Strategy Faces EBA Scrutiny 

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