PwC pay experts comment on the news that the European Parliament has postponed its vote on CRD IV until March 2013. The political disagreement between the Parliament, the Council and the Commission on a number of the CRD IV proposals, means a delay to the overall timetable is now more likely.
Jon Terry, reward partner at PwC, said:
“The lack of agreement on key elements of the Directive, namely bonus caps, capital buffers and certain liquidity proposals, will impact the overall timetable. If political agreement on the Directive is not reached in the next two months, it is unlikely that any bonus cap provisions could be put in place ahead of the 2013 compensation round. Given that the UK would need to extend the FSA Remuneration Code to implement the remuneration provisions, including any bonus capping requirements, there is a real possibility that this will not hit the main 2013 compensation round for UK banks.
“If agreement is not reached within the next two months, the industry will breathe a sigh of relief that it has another year to plan for the potential impact. Bonus capping is a major threat to European banks’ competitiveness and any compromise which includes a relaxation of the strict 1:1 bonus to salary ratio will be welcomed by the industry. However, even if the bonus cap is relaxed, these new regulations will still likely have a major impact on compensation structures in the European banking sector.
“We could see two broad compromise outcomes. One option could involve increasing the bonus cap ratio to 2:1 or even as high as 3:1, in relation to deferred pay. The other possibility is excluding certain awards, such as share awards, from the variable pay being subject to the cap.”
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