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Banks seeking to circumvent the EU's cap on bonuses for top staff could face further action from European regulators, a senior official has warned.
Michel Barnier, a vice-president of the European commission, with responsibility for financial services, said there could be "a coordinated policy response" to banks that dodge the EU bonus cap by paying allowances to their top staff.
The warning comes as the UK government sets out its case on Monday against the EU bonus cap in Europe's highest court.
The EU limited bankers' bonuses to one year's salary, or twice that amount with shareholders' approval, as part of a broader package of reforms aimed at encouraging banks to behave more responsibly, following widespread public anger at bailed-out banks paying lavish bonuses.
In response to the EU clampdown, which came into effect this year, several banks decided to pay their top executives allowances in cash or shares, instead of a bonus. Stuart Gulliver, the chief executive of HSBC, gets an additional £32,000 a week in allowances in top of his £1.2m salary. Bailed-out banks Lloyds Banking Group and Royal Bank of Scotland have awarded their top executives shares, while Barclays are among other banks with similar schemes.
In a letter to the European Banking Authority, which monitors the industry, Barnier said: "I would like to underline my strong concerns with regard to continuing reports of the use of these allowances. It is important to show a collective pro-active stance on this important matter and address the claims made that the spirit – if not the letter – of union law is being disregarded."
The European Banking Authority launched an investigation into allowance payments in June and was due to report at the end of the year, to allow regulators to take action ahead of next year's pay-setting round at the banks.
But Barnier is now urging them to speed up their work. "I would therefore be very grateful if you could share with us the results of your work on this issue as soon as possible and at the latest by the end of September, in order to ensure that we can address any concerns in a timely manner through a coordinated policy response."
Barnier can propose amendments to the law, but any substantial re-working would be seen through by his successor, who has yet to be named. Barnier's successor is expected to take office on 1 November, under a European commission headed by former Luxembourg prime minister Jean-Claude Juncker.
After being outvoted 26 to one on the EU bankers' bonus cap in 2013, the UK launched a legal challenge at the European court of justice.
A Treasury spokesman said the cap had been "rushed through without a proper impact assessment" and "could undermine financial stability by leading to higher fixed costs at banks".
The UK government will make its case today at a hearing in Luxembourg, but the ECJ is not expected to make a ruling until the end of the year at the earliest.
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