UK isolated as EU backs bonus cap
UK Chancellor George Osborne is due to fly to Brussels, determined to fight plans to curb bankers' bonuses, but EU finance ministers look likely to approve the proposals.- Q&A: Banker bonus cap plan
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Viewpoints: EU banker bonus cap
Chancellor George Osborne said a cap on bonuses could have a "perverse effect"
Chancellor George Osborne stood isolated after European Union finance ministers vowed to press on with proposals to curb bankers' bonuses.He told a meeting of EU finance ministers that he could not back the plans, which he fears could damage London's financial centre.
The EU is proposing to cap bonuses to 100% of a banker's annual salary, or to 200% if shareholders approve.
There will be further talks, but ministers will now finalise details.
Speaking after the meeting, Mr Osborne said Britain already had the toughest regime in Europe for bankers' pay and bonuses and that a cap could "have a perverse effect".
He said after the meeting: "I cannot support the proposal currently on the table."
The City of London fears the rules will drive away talent and restrict growth.
German Finance Minister Wolfgang Schaeuble said "it would be better'' to reach consensus with the UK, and further negotiations would take place.
But Michael Noonan, Ireland's Finance Minister and chairman of the meeting, said ministers would begin finalising technical details ahead of a vote next month.
The bonus proposals are part of wider measures requiring banks to strengthen their capital buffers in the hope of avoiding another financial crisis. The measures need formal approval from the European Parliament and EU states.
Michel Barnier, the EU commissioner for the single market, said high bonuses were behind excessive risk-taking by bankers. "Enough is enough. We've got to put a stop to that."
But the Mayor of London, Boris Johnson, has dismissed the idea as "self-defeating". London is the EU's largest financial centre.
'Unintended consequences' Simon Lewis, chief executive of the lobby group the Association for Financial Markets in Europe, said the proposed measures were not just a threat to the City of London, but to Europe's competitive position in financial services.
He told the BBC: "If this goes ahead, you will see the law of unintended consequences. Salaries will go up, there will be less flexibility, and the banks will be less competitive."
Last week the Federation of European Employers questioned whether restrictions on bankers' pay exceeded EU powers.
There has been speculation that the UK may try to invoke a little-used "national interest" defence to block attempts to curb bonuses.
The so-called "Luxembourg Compromise" allows a member state to block a majority decision being taken if an issue is deemed to seriously affect "a very important national interest".
Some banks have reportedly taken legal advice on whether the EU's proposals are within the law, according to the The Financial Times on Tuesday. One bank had already received legal opinion that the bonus measures contravened European law, the FT said.
Mr Lewis told the BBC that he "was sure" lawyers would be looking at whether the proposals were lawful, but added that "these are early days".
The European Commission has said that it is confident the proposals are legally watertight.
COPY http://www.bbc.co.uk
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