More Londoners will be affected by EU bonus cap under new rules

Last year, the financial watchdog put into force a limit on bonuses among bankers across the EU's 28 member states, stipulating that they could be no greater than twice the person's base salary. But at the time, there were no specific guidelines about how the limit should be applied, including exactly who it should apply to. 

 

Now the watchdog has outlined this in detail, ordering that it should be applied not just to those working in banks, but also in bank-owned subsidiaries, including the ones to which banking regulations do not usually apply, according to the FT. 

 

This means thousands more people in London, where most of the bankers hit by the cap are based, will now be subject to the curb.

 

Only in October last year, the EBA also warned that other payment methods adopted by banks to reduce the effect of the bonus caps, such as “allowances”, were also in breach of EU rules. 

 

Allowances, which are used by an estimated 39 banks, have been given to employees as part of their fixed pay to increase the size of their bonuses. The EBA demands that these are not included in fixed pay from now on.

 

The 119-page guideline document will be enforced by the end of this year, requiring the UK and all other EU member states to apply its rules in early 2016.

 

If they do not, they will be required to explain why and could face legal action from the bloc.