Just when you thought you could relax and enjoy Christmas, safe in the knowledge that the European Union had postponed its decision on capping investment banking bonuses until at least March 2013, disaster has struck: the European Parliament has brought forward its bonus vote and produced a particularly harsh proposal for the eventual cap.
The Economic and Monetary Affairs Committee, a subsection of the European Parliament with responsibility for the regulation of the financial system, today met with a negotiating team from the EU Council in an attempt to negotiate a compromise on the proposed bonus rules.
The compromise they reached is a particularly harsh one: bonuses will be restricted to 100% of salaries, unless over 75% of a bank's shareholders say otherwise. If 75%+ of shareholders do say otherwise, bonuses may be increased - to 200% of salaries and no more.
If the new compromise comes to pass, it could be a disaster for some investment bankers in London. As our chart here shows, banks like Barclays pay their 'approved staff' (the staff that would be impacted by the bonus rules) bonuses equal to 400% of salaries on average.
Fortunately, this may not be the end of the matter. Alex Beidas, a Linklaters employee incentives lawyer, points out that the European Parliament still has to vote on the Committee's compromise. If that vote passes, the proposal then has to be agreed to by the European Council.
Neither the Council nor the Parliament have so far given any indication that they will accept restrictions as stringent as those proposed today. However, it's possible that they are becoming more hard-line in their approach to bonuses.
"This latest proposal is more restrictive than I had anticipated," says Beidas. "But the people in the Committee have tried to find a solution which they hope will make it through the Parliament and the Council," she adds.
The proposal is due to be voted on in Parliament between January 14th and January 17th. If approved, it will then need to be confirmed by the Council. And if confirmed by the Council, it will need to be voted into individual law in nation states. The good news is that it's unlikely therefore to be voted into law in time to affect the 2012 bonus round.