EU Court's Advocate General Rejects George Osborne's Bank Bonus Cap Challenge

The UK Chancellor's challenge to the European Union's (EU) cap on bankers' bonuses should be thrown out, according to the Advocate General at the European Court of Justice (ECJ).

The comments come after the EU unveiled its proposal to restrict bonuses to one year's salary, which could be doubled with the approval of shareholders.

The proposed legislation is designed to reduce incentives for bankers to take excessive risks following the financial crisis of 2008.

George Osborne challenged the case in the ECJ but now Finnish lawyer Niilo Jääskinen has suggested that all the UK government's pleas should be rejected and that the ECJ should dismiss the action.

"Fixing the ratio of variable remuneration to basic salaries does not equate to a 'cap on bankers bonuses', or fixing the level of pay, because there is no limit imposed on the basic salaries that the bonuses are pegged against," the Advocate General said.

However, Jääskinen's opinion is not legally binding and a final ruling on Osborne's challenge is expected next year.

The British Bankers' Association (BBA) said it continued to support the Chancellor in his bid to stop the legislation from being enacted.

"There have already been sweeping changes made to the way that bank staff are paid since the financial crisis. Bonuses are smaller and staff are rewarded for making decisions that benefit the businesses, shareholders and the broader economy," a BBA spokesperson said.

"We believe that shareholders should be given powers to determine staff pay – not politicians. That's why banks consult with investors before setting staff pay and shareholders also have the power to vote on the pay of senior bankers,"

A report from eFinancialCareers found that the average bankers' bonus globally was 29% higher than a year ago.

The survey, which questioned 2,660 financial executives across the globe, found that in the UK nearly half (49%) of respondents reported higher bonuses, compared with 47% in the US and Hong Kong.

"While the results of survey may seem surprising, a deeper look into the UK bonus trend finds that banks are dividing their bonus pool more ruthlessly, with a priority placed on rewarding top performers," said James Bennett, global managing director of eFinancialCareers.

"Banks argue that they need to pay large bonuses to keep their top talent. It would appear that a handful have been awarded handsome bonuses while the majority did not necessarily see a huge increase."

The research also revealed that just under two in ten (18%) of respondents reported a decrease.