Consultation on bankers’ bonuses launched

The European Banking Authority (EBA) launched a consultation in July on the instruments that banks can use to satisfy the standards of its bankers’ bonus cap legislation.

The EBA’s draft Regulatory Technical Standards, which includes the requirement for banks to pay 50% of variable remuneration in non-cash instruments, is expected to lead to a diversification in the types of instrument banks use to remunerate staff.

The most common instruments to date are shares, but Luke Hildyard, head of research at the High Pay Centre, said employers should also investigate other methods to reward employees.

“Stronger clawback [powers are] needed and more share-based ties to the employer’s long-term interest is preferable to huge cash-based bonuses that can, in some cases, lead to employees benefiting from actions that yield a small short-term profit, but be damaging to the employer in the long term.”

The consultation will close on 29 October 2013 and will be submitted to the European Commission by 31 March 2014.