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| Mr Barnier said he did not see how some of the reported bonuses could ever be justifiable |
Europe's
Internal Markets Commissioner, Michel Barnier, has said that "tougher
action" is needed to curb bank bonuses.
He said
that he was "seriously worried" by the proportion of pay awarded as
bonuses in some countries, and said it encouraged excessive risk-taking.
It follows
a report from the European Banking Authority that said existing bonus rules
were not being implemented consistently by different EU countries.
Mr Barnier
said parts of the report made for "startling reading".
Unnamed
"I
cannot see how some of the ratios [of bonuses to base salaries] included in the
report... can ever be considered justifiable or a sensible way to manage risk
and long term interest," he said.
According
to the EBA report, the average bonuses paid to bank executives across the EU as
a whole was 122% of basic pay, and for other staff (mainly traders) it was
139%.
However, in
one unnamed EU country, the averages were 220% and 313% respectively, and in
one individual case a bonus of more than nine times basic pay was reported.
Mr Barnier
said he found recent proposals for bonus restrictions by the European
Parliament "both useful and interesting".
Those
proposals have included a call for bonuses to be capped at 100% of basic pay.
The
commissioner also criticised the tendency of some banks to apply existing bonus
restrictions only to a small proportion of staff - another inconsistency
between EU member states highlighted in the EBA report.
The
pan-European rules, which came into force at the beginning of last year,
require that the top executives and traders at a bank receive only about
20%-30% of their bonuses in upfront cash.
Half of
their bonus should be paid in shares, and about 40%-60% of their total bonus
should be staggered over three-to-five years, according to the rules.
Banks are
also required to cap bonuses as a percentage of an employee's basic salary.
The new
regulations have been criticised for focusing excessively on the ratio of
bonuses to basic pay, instead of the actual value of bonuses.
Many banks
have responded to the new rules by raising the level of basic pay awarded to
staff.
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