September 23, 2020

Britain Isolated as European Colleagues Support Bonus Caps

The rules, which would apply to bankers working in the 27-nation bloc and those working for E.U.-based banks worldwide, are an acute concern for the Britain’s chancellor of the Exchequer, George Osborne, who is seeking to keep London, Europe’s main financial hub, competitive with other centers of finance like New York, Singapore and Hong Kong.

But finance ministers arriving at a monthly meeting in Brussels suggested that there was little scope to assuage Mr. Osborne.

“The British authorities have problems with the banker bonus issue,” but “now there is very little further we can do for them,” said Michael Noonan, the finance minister of Ireland.

Ireland holds the rotating presidency of the Union and helped to broker talks last week with legislators on the draft law. “We pushed the negotiations to quite a degree and we got the best possible compromise,” Mr. Noonan said.

Jeroen Dijsselbloem, the Dutch finance minister, said Tuesday his country was aiming to impose even tighter rules than those under discussion at the European level and that the measures were politically important.

“I think the banking sector needs to be in a strong relation with the real economy, and with real people, and real people are very worried about the way things are running in the financial sector,” said Mr. Dijsselbloem, who also is the president of the Eurogroup of finance ministers from countries using the single currency.

Pierre Moscovici, the French finance minister, said late Monday that his country was opposed to any modifications to accommodate Britain. “I don’t think at all that it’s necessary to adapt the arrangement that’s on the table today to try and keep this or that country on board,” Mr. Moscovici said during a news conference.

The bonus legislation cleared an important hurdle last week when representatives of E.U. governments and the European Parliament agreed that the coveted bonuses many bankers receive would be capped at no more than their annual salaries, starting next year. Only if a bank’s shareholders approved could a bonus be higher — and even then it would be limited to no more than double the salary.

The rules are drafted so that a banker working in New York for a British bank like Barclays would be subject to the rules, as would a banker in London working for a U.S. bank like Citigroup.

Britain does not wield a veto because the legislation is expected to pass as long as a majority of member states approve. The E.U. finance minsters could decide on Tuesday to give the rules their political approval. But Britain may still have additional weeks, or even months, to press for concessions because important details still need to be nailed down.

“There’s room for technical amendments to be put in place,” Mr. Noonan, the Irish finance minister, said. “We’ll leave scope for that.”

Yet Mr. Osborne faces a dilemma over how strongly to argue for changes.

He faces acute pressure from members of Britain’s ruling Conservative party who favor taking a tough line against European rules that dent British interests. The party faces a growing challenge from the UK Independence Party, which wants to pull Britain out of the Union.

But supporting high pay for bankers is politically toxic among the significant sections of the British electorate who resent the outsized remuneration. Many voters also resent the banking industry for receiving a series of giant bailouts paid for by taxpayers.

Mr. Osborne also may rein in his criticism because the rules are part of a legislative package that includes something his government favors: tougher rules about how much capital European banks most hold in reserve to protect against losses.

“I hear he’s worried,” said Mr. Dijsselbloem, the Dutch finance minister, on Tuesday morning, referring to Mr. Osborne. “We’ll see how it goes today.”

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