Next Score View the next score

    Bucking EU, Britain rejects bank bonus camp

    BRUSSELS — Britain stood isolated against a majority of European Union countries Tuesday in refusing to back legislation that would strictly limit bankers’ bonuses.

    At a meeting of the bloc’s 27 finance ministers, Treasury chief George Osborne said that Britain, home to one of the world’s largest financial industries, can’t support the current proposal to limit bonuses. It fears the cap would drive banks to the United States or Asia.

    But Ireland’s finance minister, Michael Noonan, who chaired the meeting because his country holds the rotating EU presidency, said a ‘‘broad majority’’ favors the legislation. This gives the necessary green light for finalizing technical details before a formal vote next month.


    The bonus cap is part of a 1,000-page package of financial rules that would require banks to hold more capital and liquid reserves starting next year — to shield taxpayers from having to pay for any more expensive bailouts. The rules would implement the internationally agreed upon Basel III rules on capital buffers and lay the groundwork for a single banking supervisor for the 17 EU countries that use the euro.

    Get Talking Points in your inbox:
    An afternoon recap of the day’s most important business news, delivered weekdays.
    Thank you for signing up! Sign up for more newsletters here

    ‘‘It’s about protecting taxpayers in the future by building stronger European banks,’’ Noonan said.

    The bonus cap would be set at one year’s base salary, or double that if a large majority of the bank’s shareholders agree. The measure would affect all of Europe’s banks and be mandatory for European units of foreign banks and employees of EU banks who work overseas, such as in New York.

    European officials are trying to avoid forcing the legislation through without Britain’s consent. That would be a politically toxic move, given the significant level of skepticism about the euro in Britain.

    Germany’s finance minister, Wolfgang Schaeuble, said ‘‘it would be better’’ to reach a consensus.


    Prime Minister David Cameron of Britain sees Brussels as meddling too much. He has vowed to renegotiate his country’s ties with the European Union and hold a referendum on Britain’s membership in a few years.

    Schaeuble, representing Europe’s biggest economy, said the European Union should not isolate Britain on the legislation because that would strengthen euro skeptics.

    Britain also fears the bonus cap would drive up base salaries and hamper growth. Proponents of the cap say high payments encouraged bankers to take massive risks at the expense of the long-term future of their businesses, helping to destabilize the financial system in 2008.

    Osborne said Britain understands the public’s sentiment that bankers must be more accountable. The United Kingdom has already introduced rules on bonuses, shifting them toward long-term incentives and including legal possibilities to claw back bonuses.

    Britain, among other things, is proposing that a greater part of bonuses be deferred for up to five years, making them more of a long-term incentive rather than rewarding risky bets.


    One area where the ministers found common ground was on Ireland and Portugal. The meeting agreed in principle to grant relief to the two countries, which have received bailouts, by giving them more time to pay back their debt. Ireland hopes for an extension of up to 15 years.