BANKERS’ BONUSES across Europe would be capped at no more than their fixed salaries under strict new curbs sought by senior politicians in response to continued public anger over financial sector pay.

In a sign that Brussels is hardening its stance on banker pay, MEPs are drawing up new caps on bonuses to be included in the bloc’s latest bank capital rules.

The move comes as research from the pan-EU banking regulator reveals huge disparities in bonus sizes across the region and big differences in enforcing existing EU pay rules, which limit the upfront cash portion of a bonus to 25 per cent of the total.

The European Banking Authority survey found that the median average ratio of bonus to salary across the block was 122 per cent for executives and 139 per cent for other risk-takers, such as traders. One country however reported an average ratio of 313 per cent for traders – and one institution had a ratio of 429 per cent for executives and 940 per cent for other staff.

MEPs have tabled dozens of remuneration amendments to planned legislation to implement the Basel III international bank capital rules.

In an indication of where this legislative activity may lead, Othmar Karas, the parliament’s lead negotiator, yesterday signalled that a “one-to-one” bonus ratio was likely to be a key demand in talks with EU member states.

To be enacted, any pay rules would need to be agreed with those states, which are generally more cautious about rigid restrictions. However one industry lobbyist warned that the current political climate would make any new initiatives “hard to resist”.

Michel Barnier, Europe’s top financial regulator, is encouraging the MEPs to take a hard line on the issue. “I cannot see how some of the ratios included in the report of variable to fixed remuneration can ever be considered justifiable or a sensible way to manage risk and long-term interest,” he said.

“It is proof once again that tougher action is necessary.”

A fixed cap on bonuses would be resisted by Europe’s main financial centres, chiefly London.

“If they do put caps in, this could have disastrous unintended consequences. It could result in significant increases in fixed pay,” said Jon Terry, global head of human resources consulting at PwC. “It substantially affects the flexibility of the business.”

The EBA survey says 10 per cent of bank employees are caught by deferral rules in some countries but fewer than 1 per cent in others. It declined to identify member states concerned. – Copyright The Financial Times Limited 2012