Banks in Britain have been ordered enforce the EU cap on bonuses.
To skirt about the cap introduced by the EU, banks devised the so-called role-based allowances (RBAs) in order to keep paying staff large amounts.
It was hoped that these would be covered in EU rules as fixed pay.
But the European Banking Authority (EBA) says the payments are in breach of the bonus cap rules.
It has ordered UK regulators to crack down on the practice.
The EU cap limits bonuses to the same level as a banker’s salary, or twice the salary if shareholders agree.
But the RBAs can amount to millions. The new CEO at Barclays, for example, has been offered one of £1.15 million per year.
The EBA said: “The EBA is of the view that RBAs that are not predetermined, are not transparent to staff, are not permanent, provide incentives to take risks or, without prejudice to national law, are revocable, should be classified as variable remuneration (bonuses) in line with the letter and intent of [the EU’s ruling].”
The Bank of England’s Prudential Regulation Authority said it has issued firm instructions to banks to either stop paying RBAs or to treat them as bonuses.
