BLBG: European Bank Bonus Payouts Said to Be Scrutinized by Regulator
The European Union’s top financial regulator will review this year’s bonus awards following criticism of large payouts for bank executives, two people with knowledge of the situation said.
The European Banking Authority will check whether capital rules curbing bonuses were properly implemented by national supervisors, including the U.K. Financial Services Authority, said the people, who asked not to be identified because the review isn’t public. The EBA could force authorities to explain why bonus rules weren’t implemented or propose rules that would apply in all 27 EU-member states, one of the people said.
“The key question is whether the mandarins at the EBA feel they have the competence to set out hard limits,” Bob Penn, financial regulation partner at Allen & Overy LLP, said in a telephone interview in London today.
The Committee of European Banking Supervisors approved laws to curb incentives for excessive risk-taking last year, imposing limits on cash payouts. Labor leaders criticized Barclays Plc (BARC) Chief Executive Officer Robert Diamond earlier this month after the bank said it was giving him a 6.5 million-pound ($10.4 million) bonus, pushing his total compensation to 10.1 million pounds and making him the U.K.’s top-paid bank CEO.
Moderation Calls
EU rules allow bankers to receive about 25 percent of bonuses in immediate cash payouts and require the rest to be deferred or held in shares for a minimum of three years. EU Financial Services Commissioner Michel Barnier said earlier this month that calls for moderation on bonuses had not been heeded and that the EU would consider further steps if “need be.”
Royal Bank of Scotland Group Plc (RBS), the U.K.’s biggest government-controlled bank, gave CEO Stephen Hester and eight top executives about 28 million pounds in shares.
Britain’s four biggest banks said total bonuses for U.K.-based employees will be lower than last year and pledged to boost business lending in a bid to end what Hester called “banker bashing.”
Joseph Eyre, an FSA spokesman in London, declined to comment. Franca Rosa Congiu, a spokeswoman for the European Banking Authority, didn’t immediately respond to calls and e- mails seeking comment.
The FSA split financial institutions into four groups based on their size to implement the EU guidelines, applying the toughest bonus rules to firms with “significant proprietary trading and investment banking activities,” the regulator said in a statement in December.
ING Bonuses Scrapped
ING Groep NV (INGA) scrapped proposed executive bonuses this month after the pay policy of the bailed-out lender sparked criticism.
“The variable remuneration for the management board for 2010 threatens to inflict renewed damage to the recovering trust of our customers and society,” CEO Jan Hommen, 68, said in a letter to Dutch newspaper De Volkskrant. “We have underestimated the signal this sends to society.”
ING had said Hommen would get a 1.25 million-euro bonus, split equally between cash and shares, after the biggest Dutch financial-services company reported its first profit in three years.
That triggered criticism from lawmakers and Dutch Finance Minister Jan Kees de Jager said he was “disappointed” as the Amsterdam-based bank still has to repay 5 billion euros of state aid.
To contact the reporters on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net;
To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net
