Posted on Sep 26, 2020 at 7:10 am

It is a position taken to say the least surprising: five months after the call of the European Central Bank (ECB) to be “extremely cautious” of banks in terms of bonuses in the heart of the coronavirus crisis, here is Paris and Berlin defend a relaxation of future rules for certain establishments before the European Commission.

The request emanates from a document common to both capitals, within the framework of the discussions on the CRD5 directive, and has already been defended to a group of experts from the European institution.

The object? Allow banks with less than 10 billion euros of balance sheet in France and less than 15 billion euros in Germany not to be subject to the bonus ceiling corresponding to once the salary is fixed. The measure taken in 2013 to reduce excessive risk-taking by banks after the financial crisis had made European finance cringe. The banks feared losing competitiveness against the American giants. Some relaxations had in the process been granted to the smaller banks. Paris and Berlin now want to ensure that these exemptions remain in the new text.

Private banks and Sparkassen

This exemption request, if it does indeed win the consent of regulators in Europe, would concern a handful of institutions in France: local banks such as Pouyanne, Inchauspé, or Crédit Municipal, but also My Money Bank in the repurchase of credit. or the Younited platform, as well as entities such as Edmond de Rothschild and Lazard Frères Banque. The heart of the provision would aim above all, one explains, to alleviate this constraint for many independent German establishments, such as the Savings Banks, the sector being very fragmented across the Rhine.

Paris and Berlin claim to simply want to reintroduce existing exemptions into the future text. In the new directive, only a part of them have in fact been included, such as the minimum deferred payment of bonuses or the percentage that must be paid in financial instruments. But not the cap on bonuses.

Maintenance of remuneration “principles”

In addition, it is argued, the bonus practices of these institutions with less than 10 to 15 billion euros balance sheet would be below this famous “bonus cap”. Finally, these exemptions would remain conditional: they would suppose that the bonuses only form a “limited” part of the total remuneration. These banks would also remain bound by regulatory obligations in terms of remuneration, but on the basis of “principles” and under the supervision of a supervisor.

Still, taking a position on bonuses falls badly on the political agenda. All sectors combined, savings measures and job cuts are at work and may not even be enough with the resumption of the pandemic.

A point that all supervisors are aware of. At the heart of the first wave of the pandemic in the spring, Andrea Enria, the president of the prudential supervisory board of the ECB, had not only called for caution on dividends but also on remuneration, which is higher in banks than elsewhere.

Then in the process, he said he was ready to intervene if the banks did not demonstrate “Of extreme moderation” in the payment of bonuses. The message was relayed by the European Banking Authority (EBA). “If necessary, the supervisor has the power to take action against each bank”, had thus explained to the “Echos” two experts of the EBA, Bernd Rummel and Djamel Bouzemarene.