Bankers accused of using 'sneaky ways to dodge bonus limits'
- 11 January 2014
- From the section Business
Bankers are using "sneaky" ways of avoiding the European Union's new cap on bonus sizes, a think tank has claimed.
The High Pay Centre predicted bankers would enjoy yet another bumper year of bonuses while other workers saw their wages stagnate.
It comes as banks prepare to pay bonuses for last year's performance.
The British Bankers Association said bonuses were now "smaller" and rewarded sound, long-term decision making.
The UK government is currently preparing a legal challenge to an EU cap on bonuses which limits payouts to 100% of basic salary.
The cap is designed to come into effect on bonuses awarded from 2014.
Banks have been accused of raising basic salaries to compensate for lower bonuses in response to the EU-wide cap.
Some banks have introduced a new role-based payment to top up overall pay packets for senior staff.
These payments are linked to the job, not the individual, and are therefore not categorised as a bonus payment.
The High Pay Centre described this as "sneaky" and insisted the bonus culture risked draining spending power from the rest of the economy.
Spokeswoman Deborah Hargreaves said: "We saw fat-cat Wednesday last week, where top bosses on an average of £4.3m a year had already taken home as much as average earnings in two and a half days this year.
"It is wrong to be over-paying a small group of people at the top and leaving the rest of the workforce struggling to make ends meet."
The think tank also said that in 2012, Barclays Bank alone paid a higher number of people more than £1m than the entire Japanese corporate sector did.
According to the Office for National Statistics, annual bank bonuses peaked at £19bn before the financial crisis and stood at £14bn last year.
Since then, most bonuses have been paid in shares, which cannot be sold for three years and can be clawed back for poor performance.
A spokesman for the British Bankers Association (BBA) said: "Banks will of course comply with these new rules. Since 2007 there have been sweeping changes in the way bonuses are awarded and paid.
"Bonuses are now smaller and staff are rewarded to make decisions that benefit their customers, and their businesses and shareholders in the long term."
The Treasury stated last year that it thought the new EU bonus rules would push up fixed pay, rather than leave bankers less well paid.
The bonus culture has also been blamed for encouraging excessive risk-taking among bankers.