GREENS have welcomed a recommendation that the UK government’s legal action against a clamp down on bankers’ bonuses should be rejected by the European Court of Justice. The verdict by the Advocate General, who makes recommendations to the Court of Justice, says that all the UK’s pleas should be rejected and that the Court of Justice dismiss the action.
Greens in the European Parliament were the driving force behind a proposal to cap bankers’ bonuses at a fixed rate of 100 per cent of salary. As a result, the proposal was enshrined in the EU's capital requirements directive [1]. This piece of EU legislation was challenged by Chancellor George Osborne through Europe’s highest court; he argued that the EU had gone beyond its remit, breaching a series of legal principles, and sought to overturn the ban on awards of more than twice fixed pay.
Molly Scott Cato MEP, who sits on the European Parliament’s Economics Committee, said:
“I am delighted that the European Court of Justice has thrown out Osborne’s attempts to appease his chums in the City. The cap on bankers bonuses, pushed for by the Green Group, has been completely vindicated. The Advocate General has rightly pointed out that the moral hazard created by incentive-based remuneration packages within financial institutions were one of the key underlying causes of the financial crisis. The bankers' bonus cap is an important first step to end the pernicious banking culture where excessive risk taking is rewarded while the cost of failure is borne by the taxpayer.”
Philippe Lamberts, who was a key architect of the scheme in the European Parliament, said:
“It is a pity the UK government does not devote the same dedication and energy to ensuring we have truly robust regulation of the financial sector, as it does to maintain the obscene and distorted levels of remuneration of bankers in the City of London.”
Notes
[1] Under the EU's capital requirements directive, the variable remuneration of bankers and traders may not exceed the total amount of their salary (at a ratio of 1:1). The UK government had challenged this on the grounds that it is not a competence of the EU but this challenge today received a negative opinion from the advocate general of the European Court of Justice. The European Court of Justice ruling itself will now follow but its ruling typically follows the opinion of the advocate general.