Part of Basel III, the international regulatory framework for banks  that the EU is currently putting into effect, is being challenged by the United Kingdom (UK).  The UK has a problem with the part of Basel III that imposes a cap on the amount that a banker can earn as a bonus. 

The cap was designed to limit bonuses for bankers up to the amount of bankers salaries. The amount can be higher if the shareholders agree. The UK was the only Member State that opposed the plan during the discussions to implement this regulation.

The six reasons that the UK stated that it does not believe that the cap will not work are:

  1. “It is unfit for purpose, and was introduced without any impact assessment
  2. It unlawfully delegates to the European Banking Authority (EBA) because it concerns policy and is not simply a technical matter
  3. It is legally invalid because it contravenes the legal base of regulation that expressly excludes legislation ‘affecting the rights and interests of employed person’
  4. It is being rushed into effect without the necessary legislation in place including rules determining to whom the cap will apply
  5. It fails to protect personal data
  6. It wrongfully applies outside the European Economic Area”

The challenge was filed with the European Court of Justice on September 20th, 2013 by the Chancellor of Exchequer/Second Lord of Treasury for the United Kingdom. Chancellor George Osborne of Britain believes that this cap will increase the basic salaries of bankers and further reduce the ability to efficiently link performance with pay.

Commenting about the challenge to the regulation, the Chancellor stated that it was to “ensure the legislation respects the EU Treaty.” Cases usually take 18 months to two years to be heard so the UK has stated that it will adhere to the policy while the challenge is taken up.

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