Banks across the EU have been put on notice that regulators are preparing fresh guidelines to ensure they do not breach a cap on bonuses.
The European Banking Authority also published its first analysis of pay practices across Europe which confirmed that the City has more top earners than all other EU states combined. The pan-European watchdog said it was scrutinising new "allowances" being handed out to circumvent the cap, which was introduced this year and restricts bonuses to 100% of salary, or 200% if shareholders approve.
Top earners are defined as staff earning €1m (£800,000) or more. The latest analysis by the EBA is based on previously published data showing that in 2012 more than 2,700 bankers in the UK were paid more than €1m.
HSBC was the first UK bank to publish allowances for its top staff, handing its chief executive Stuart Gulliver an annual allowance of £1.7m each year.
The EBA said it had "concerns that these practices do not conform to the requirements" set out in the directive.
"In general these allowances, which are paid as fixed amounts in addition to the base salary, are considered by institutions as fixed remuneration. However these allowances are discretionary as they are paid to selected members of staff and in most cases only for limited periods of time. Under exceptional periods they can also be cancelled," the EBA said.
"The EBA is currently analysing this emerging practice and will set guidance criteria to correctly assign these elements to either variable or fixed remuneration so as to ensure that these practices do not lead to a circumvention of the newly introduced cap between the variable and fixed component of remuneration," the regulator said.
The EBA is expected to publish in the coming weeks its initial findings on the use of allowances with a consultation on updating its guidelines later in the year. There will not be any retrospective attempt to claim back payments already made through such allowances.
The regulator, which is based in London but oversees regulations across the EU, found that there were discrepancies across states about which bankers fell under the scope of the pay codes and how much of their bonuses were deferred. It also expects the number of bankers in the City covered by the bonus cap – which covers those who are deemed to manage and take risk – to rise.
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