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Eversheds comment: Banker bonus curbs give non-EU locations the recruitment edge

  • United Kingdom

    16-04-2013

    Commenting in light of EU-wide rules to curb banker's bonuses, which have been approved today by the European Parliament and are likely to be effective from 1 January 2014, Paul Fontes, partner at global law firm Eversheds, says:

    "Proposals to cap bonuses as a multiple of fixed pay have caused significant disquiet in the City of London where, for a significant proportion of the workforce, they have tended to outstrip base pay many times over. Now bankers will not be able to receive a bonus greater than their fixed annual salary unless shareholder approval is obtained. Even then, the limit is twice annual fixed salary.

    "An obvious concern is the impact this rule could have on the ability of banks in the City to attract and retain key talent from other non-EU locations with different rules. The long-term effect on the City remains to be seen but as it now stands, these non-EU jurisdictions look to have a significant recruitment edge.

    "The cap is also likely to result in many financial institutions increasing base pay, which will in turn merely increase their fixed costs, in order to get around this rule."

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