Bonus cap might give rise to basic salaries

Bonus cap might give rise to basic salaries

Financial sector experts have said that the new limit announced by the European officials on the amount of bonus that can be given to banking officials will result in higher basic salaries among other initiatives giving additional benefits to the bankers.

Bankers in the leading financial hub of London are particularly concerned over the limits but experts believe most of them already have ways to circumvent the new legislations. Experts said that if there are restrictions on paying bonuses, the banks will simply increase other allowances for the officials. Many expected the basic salary component in the packages to rise following the imposition on the limit on the payment of bonuses.

There are indications that the European Banking Authority would limit extra pay-outs for anyone whose salary is above €500,000. The EBA proposals are scheduled to take effect in 2014-15, will also require bonuses of some officials to be capped to 100 per cent of their salary or 200 per cent with the approval of shareholders.

The influential financial sector of the UK is opposing the agreement that was reached in the previous week because it believes that the agreement will put the region in a disadvantageous position and the financial firms will move to other financial hubs of the world. The agreement states that banks will not be allowed to give out bonuses that are bigger than the base salaries of bankers to them from next year onwards.

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