In January 2014 the European Union’s bonus cap will come into effect. From next year, bonuses at banks within the EU and at European banks globally will be capped at 100% of salary – unless two thirds of shareholders vote otherwise, in which case bonuses can be boosted to 250% of salary. The cap will apply to all so-called ‘code staff’ (‘identified staff’ in European parlance).
Today, the definition of identified staff has been changed. Thousands of bankers in London and New York can breathe a sigh of relief.
Under previous edicts, the EU defined anyone earning more than €500k (£420k, $686k) as code staff, says Sam Whitaker in the London office of law firm Shearman & Sterling. This would have brought thousands of bank employees in the City of London and New York under the auspices of the bonus cap, says Whitaker – even if they’re not necessarily working in risky front office jobs.
Under the latest and (seemingly final) edict, the EU now says that bank staff can earn more than €500k and still escape the bonus cap. However, they’ll have to persuade their national regulator that they’re not a ‘material risk taker’ in order to do so. Bankers earning more than €1m will have to persuade the European Banking Authority itself that they’re not a material risk taker if they want to escape the cap.
“This will bring considerable relief to banks who were otherwise concerned that numbers of Code Staff would, because of this provision, expand considerably,” says Whitaker.