The Treasury has launched a legal challenge with the European Court of Justice to fight EU rules to cap bankers’ bonuses.
The EU passed tough new rules in March to cap bank bonuses at 100 per cent of salary or 200 per cent with shareholder approval.
The rules passed with 26 to 1 approval among EU member states with the UK left isolated. The Treasury fears it will lead to higher fixed salaries, creating instability in the banking sector.
The challenge, announced by the Treasury last week, focuses on comparing the cap with the EU Treaty and powers delegated to the European Banking Authority. The Treasury believes the supervision of the bonus cap by the EBA goes well beyond its remit of setting technical standards.
It is the third ECJ legal challenge the UK has launched this year after actions on short selling and the financial transaction tax where it has seen some success. It has also seen off EU attempts to move Libor supervision to Paris with the European Securities and Markets Authority.
Open Europe head of economic research Raoul Ruperel says: “This will be more difficult to win than the other challenges but it does have some similarities with the short selling case such as using the single market to extend into social and employment issues, which the EU is not meant to be involved in.”