It's taken global lawmakers long enough, but things are now about to change big time on the bonus front. In one form or another, the impact of new bonus legislation will be felt around the world.
The Committee of European Banking Supervisors issued its 84-page draft Guidelines on Remuneration Policies and Practices Friday. The main points include:
Cash portion of bonuses limited to 25% of awards in some cases
Between 40 - 60% of bonuses should be deferred, with a minimum deferral period of between 3 - 5 years
Prohibition of mid-year deferred bonus payouts
No multi-year guarantees (existing staff contracts will need to be renegotiated)
The rules to apply in all geographical locations - if you work for an EU headquartered organisation, you can't move to Asia to get round the legislation
Here's what the smart money has said about the draft guidelines:
'The problem is not whether the cap is 30% or 50%, the problem is that we would like to see the same regulation for every country, not just in the EU.
'A solution agreed at the EU is not an international solution unless it is agreed also with the other Group of 20 members. We need to look across the Atlantic to the US, and east toward Asia, to ensure changes are imposed sensibly everywhere'.
Angela Knight, CEO of the British Bankers Association (The Wall Street Journal)
'Of particular concern will be the requirements that will apply to European banks operating, for example, in Asia, compared with local firms. Unfortunately this deviation from global trends in banking remuneration could make it more likely that banks move operations, or at least expand, outside of the European Union.
'Many banking organisations could question why a globally mobile employee would continue to work for a European institution that will subject their pay to these provisions as opposed to a non-EU competitor bank'.
Jon Terry, PwC (The Guardian)
Meanwhile, over in the US, Fox Business News reports that many financial markets professionals are now expecting the Federal Reserve to seek compensation caps for hundreds more employees at Wall Street firms, as the central bank is said to be looking at placing specific caps on those bankers who run books of business with assets worth over $1bn.
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