TRANSCRIPT
REPORTER: A decision from the EU - that's not going down well in the City of London. Bankers in Europe can expect their bonuses to be capped from as early as next year. EU officials want to introduce the strictest pay limitations in the world. Politicians hope the law will soothe public anger about excessive earnings in the financial sector. EU Commissioner Michel Barnier ...
MICHEL BARNIER "It's to prevent bonuses - which used to be given out, and sometimes still are - which citizens don't understand or find justifiable and which encourage short-term risk taking."
REPORTER: No banker will be able to earn a bonus bigger than their annual salary without the bank's shareholders being consulted - and only then double their pay packet. That's a blow for the British government, which had argued against limiting bonuses in order to protect one of its most important industries. The City of London is Europe's financial capital. It employs140,000 people and will be hardest hit. The rules will apply to all bankers working in Europe - and to those outside employed by a European bank.
BRITISH PRIME MINISTER DAVID CAMERON: "We have major international banks that are based in the UK, but have branches and activities all over the world. And we need to make sure that regulation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding while being located in the UK."
REPORTER: Europe is still dealing with the effects of the 2008 financial crisis. But not everyone's convinced it's the right way to regulate bankers' behaviour.
JOSE, BANKER: "There's a huge disparity between what senior management gets and what junior members of the company get."
MARIAM, WORKER FOR TRAIN COMPANY: "They earn too much, and the bonus has to be less than ... like, a lot of companies are doing a bonus of like 80% of a salary."
IAN, FINANCIAL WORKER: "It meets with what I think people want to hear, but in reality I think it's the wrong way to shape their remuneration."
REPORTER: Politicians say the bonus cap is designed to make banks safer. Banking analyst Ralph Silva says it's a step in the right direction.
RALPH SILVA, BANKING ANALYST: "It's the first attempt at actually managing bonuses on a region-wide level so we should applaud that. But it's not going far enough. Basically what they're saying is that it's going to be a percentage of salaries, so why not just increase salaries. And that's what we expect to see, is an increase in the base salary of bankers so at the end of the day, they're going to get about the same amount of money."
REPORTER: The size of 2012's bonus pool at bailed-out UK lender Royal Bank of Scotland hasn't gone unnoticed. RBS spent 600 million pounds on bonuses last year, despite posting a £5.2 billion pretax loss. The legislation - which still needs EU approval - can't come too soon for some.
