Weeks after the United Kingdom’s legal challenge to the European Union’s bonus cap policy another challenge has surfaced against the policy.

Now, the second largest bank in the EU, Barclays,  has decided to circumvent the bonus cap policy by providing a new payment plan for the top bankers. 

The EU’s current policy prohibits any bank from giving a banker an annual bonus higher than the amount of her salary or double her salary if the shareholders of the bank have specifically approved of the bonus. 

The new policy that Barclays is discussing would be a cash allowance in addition to annual bonuses and the salary that the banker already receives. The payment plan would include a monthly allowance that would be paid in cash and would not count toward their pensions. Barclays’ new payment scheme would also allow a more flexible payment scheme that can be removed if the employee switches roles at Barclays. This will ensure that the policy is still in compliance with the bonus cap because it is not considered a part of the salary or based on the performance of the employee. 

This proposal is expected to cause a shareholder’s uproar because Barclays has already incurred a 5.8 billion euro fine imposed by banking regulators and a 290 million euro fine for “manipulating the interbank borrowing rate.” 

Barclays has declined to comment about the proposal. There is speculation that the reason that Barclays is employing this payment policy to circumvent the EU policy because of concern that many of the senior staff at the large bank will transfer to banks in Asia and United States.

Barclays is not the only banking company that has made moves to circumvent the EU bonus cap. HSBC Holdings PLC, Europe’s largest lender, stated that it will try to circumvent the EU policy by raising the salary for any banker that works for it.

 

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