Negotiations to introduce a cap on bankers' bonuses in the European Union stalled on Tuesday, after EU countries and the bloc's parliament clashed over how far to go in curbing pay for the industry's top earners.
The talks, described as tense by one person present, with some in the room "doing a lot of yelling", resume next week.
Although a cap on bonuses still appears likely, it is unclear whether the limit will be set at the level of a banker's annual salary as early indications suggested, or higher.
Lawmakers in the European Parliament, backed by Germany and France, have argued that caps on bonuses will prevent the reckless risk-taking that led to the financial crisis, but they face opposition from Britain, home to the region's financial capital.
Othmar Karas, the Austrian member of parliament who is negotiating the final shape of the law, said the parliament was sticking to demands for a maximum limit on bankers' bonuses of two times salary if given shareholder approval.
"This chapter has not ended," he told reporters after the talks.
Another official who followed the discussions said there had been no agreement on bonuses, with several parties unhappy with a proposal to allow for a higher cap of three times salary.
"There still remain a few issues to be resolved," said a spokeswoman for Ireland, which as the holder of the rotating EU presidency, steered the talks.
A bonus cap would play well with austerity-weary voters, who take a dim view of bankers' continuing to take lottery-sized bonuses from an industry propped up by trillions of euros of taxpayers' money.
But disagreement on this point could have a far wider fallout as it could further delay a wider body of legislation introducing stricter capital rules for banks, known as Basel III, to make them safer. Talks on Tuesday also examined these rules but here, there was also divergence.
Banks have pushed for months to influence the rules, flooding lawmakers with suggested amendments. Regulations such as these have seen financial lobbyists mushroom in Brussels, some of whom can earn more than 400,000 euros ($534,000) a year.
BACK TO BASICS
In London, home to some of the globe's biggest dealing rooms, bankers said the new regime would prompt a move to higher basic pay rather than a shift away from the skyscrapers of Canary Wharf and the City of London financial district.
Some argue that switching the focus to basic pay could perversely encourage more risk-taking, as bankers' earnings would be less dependent on performance and could not be clawed back if things go sour.
"All you're going to do is convert bonus to fixed salary," said one senior banker, who declined to be named. "You can't stop that."
Nicolas Veron, of Brussels think tank Bruegel, said tighter bonus curbs would do little to reform Europe's banks.
"The reason Europe is taking an ever more radical approach to regulation is because it hasn't managed to solve its financial crisis," said Veron.
"But bonus restrictions will not fix finance. The problems in European banks didn't originate on the trading floor. If you think about the Irish banks, they were as much retail and commercial banking as investment banking."
Shareholder advisory firm PIRC, however, whose clients run more than 1.5 trillion pounds ($2.3 trillion) in assets, said a bonus cap could lead to more conscientious stewardship from fund managers, many of whom have nodded through controversial executive pay deals that their clients might have objected to.
"If the emphasis is put back on base pay, and banks continue to try and push it up, this may, finally, trigger a response from investors," PIRC said.
European wrangling over bankers' pay has already held up an EU law meant to implement a global bank capital accord known as Basel III, one of the world's most important regulatory responses to the financial crisis.
While London has accepted that the cash bonus should be no higher than a banker's annual salary, it says a bonus paid in share options, for example, should be allowed to exceed that limit as it can be clawed back.
Even some bankers agree remuneration has to be tackled.
The former chief executive of Switzerland's UBS told a British parliamentary committee last month that "mercenaries" in his bank's dealing rooms were to blame for a rate-rigging scandal that has cost the lender $1.5 billion and damaged its reputation.
Under pressure from regulators and shareholders, banks have cut bonus pools and awards are increasingly deferred for longer periods, subject to clawbacks and sometimes paid in ways that mean there is no payout if the bank's fortunes falter.
Britain has not capped bankers' basic pay. London dominates the market for foreign exchange and derivatives trading and its property market, luxury stores and jobs pool is heavily dependent on high-spending investment bankers.
Prime Minister David Cameron's failure to block a possible European bonus cap on banks is a further sign of Britain's waning ability to influence European financial reforms.
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