LONDON (Reuters) - Allowances being paid by Britain’s banks to soften the blow of a cap on bonuses is the “least worst alternative”, Bank of England Deputy Governor Andrew Bailey said on Tuesday.
Some lenders are planning to pay monthly or quarterly “allowances” on top of a banker’s fixed pay as the European Union caps bonuses to no more than twice fixed salary, with shareholder approval.
Britain has challenged the bonus cap in the EU’s top court, saying it simply bumps up fixed pay at banks, making it harder for them to cut costs in a downturn. The central bank is permitting allowances as long as they are not tied to the performance of the bank or employee.
The EU’s European Banking Authority and the bloc’s European Commission are checking if such allowance breach the EU bonus rules.
Reporting by Huw Jones; Editing by David Holmes