'This is the final nail in the coffin for European banks'.
The European Union’s largest securities firms may have to raise fixed pay for bankers or risk losing their highest-paid staff to U.S. competitors after the region’s banking regulator blocked efforts to sidestep limits on bonuses, according to analysts and recruiters.
Bloomberg News reports that on Wednesday the European Banking Authority gave firms until the end of the year to bring their practices into compliance with EU rules that ban bonuses of more than twice fixed pay after finding 39 banks got around the cap.
Barclays and HSBC are among the biggest European lenders with global investment banking operations that have sought to offer employees discretionary payments tied to the role the employee holds. At stake is the firms’ ability to retain staff in some of their most profitable businesses and compete with U.S. firms without boosting fixed costs. Unlike U.S. and Swiss firms that are only subject to the restrictions in the EU, European firms must implement the rules worldwide.
'This is the first time banks haven’t been able to circumvent the continuous pressure from Brussels to stop additional pay to bankers,' said Jason Kennedy, chief executive officer of London-based recruitment firm Kennedy Group. 'This can be a total disaster for them. This is the final nail in the coffin for European banks vis-a-vis the battle to remain ahead of U.S. banks.'
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