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EXCLUSIVE-UPDATE 1-EU's Barnier examines more bank pay limits
January 23, 2012 / 4:10 PM / 6 years ago

EXCLUSIVE-UPDATE 1-EU's Barnier examines more bank pay limits

* EU regulatory chief suggests squeeze on top banker pay

* Barnier proposes fixed ratio between salaries and bonus

* Commissioner warns failure to act risks backlash

By John O‘Donnell and Julien Toyer

LONDON, Jan 23 (Reuters) - The European Commission is considering more rules to curb banker pay, including a possible limit on how much star performers and managers are paid compared to junior staff, as well as a fixed ratio on bonuses over salary, its regulatory chief said on Monday.

In an interview, Michel Barnier outlined his idea for a set ratio between the pay of a bank’s top staff and its junior employees, warning that failing to introduce stricter rules on banker pay risked creating a public backlash later.

“If banks are incapable of self-discipline with regards to bonuses, then we must act,” said Barnier, who is the Commissioner in charge of proposing and writing the first draft of new Europan Union law.

“Among the ideas that we are exploring is a ratio between fixed salary and bonus,” he said. “Another idea which could be considered is a ratio between the lowest level of pay in a bank and the highest level of pay.”

Barnier’s suggestion, if written into EU law, would represent one of the most intrusive financial regulations from Brussels since the start of the financial crisis.

While it is likely to be opposed by bankers in the City of London and elsewhere, it could prove politically popular.

Barnier will have an opportunity to discuss his ideas with leaders of finance and industry when he travels later this week to Davos, in Switzerland, for the World Economic Forum.

The EU has already introduced rules to limit how much of a banker’s bonus is paid out in cash, in one of the most significant financial reforms yet from Brussels. EU law also insists payouts are made over up to five years.

The latest suggestion from Barnier, who has grown frustrated with what he sees as banks’ continuing failure to lower pay, would go further by setting actual limits on how much people are paid.

“Politicians will find it harder and harder to explain to the wider public as some of them experience hardship why bankers get such huge bonuses,” said Barnier. “If we don’t regulate now, you risk a violent reaction.”

(Reporting By John O‘Donnell and Julien Toyer. Editing by Jane Merriman)

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