EU Unites on Bank Bonus Curbs as Fed Moves Toward Tougher Regs

The Europeans will be bringing the heat over banker bonuses to next week’s G-20 summit of world economic powers. But the U.S. Federal Reserve may be ahead of the Europeans when it comes to regulating banker pay.

All 27 European Union nations have agreed that banker bonuses should be deferred over time to avoid rewarding short-term risk taking at the expense of long-term benefits. The New York Times reports European leaders reached an agreement over a three-hour meeting Thursday, and that agreement allows them to go to Pittsburgh next week with a unified voice on banker pay.

“Europe is united on a strong political message,” Nicolas Sarkozy, the French president, said. France and Germany have been more aggressive about seeking curbs on bank pay excesses, while the U.S. and U.K. have been less eager to interfere in pay at banks.

But British Prime Minister Gordon Brown said he supported clawing back bonuses, “if they were not owned over a long period of time.” There was, he said, “no going back to the bonus structure of the past.”

While the EU action may seem to set up a confrontation with the U.S. during the September 24 to 25 meeting, the U.S. is coming up with banker pay curbs of its own, the Wall Street Journal reports.

The Fed is drafting a plan that would set up a system whereby the Fed would approve the pay packages for thousands of bankers. The Fed could reject any pay package for any bank employee that encouraged too much risk taking. Sources tell the Journal the plan is weeks away from completion, but that it would not require Congressional action to be put in place. A vote of the Fed’s board would be enough to start the pay-regulation scheme.

Meanwhile, though, banking is still plenty lucrative, if you’ve got the right job. Citigroup CEO Vikram Pandit said $100 million is too much for a banker to make. But he has an employee, Andrew Hall, a trader at a Citigroup unit, who could indeed be in line for such a haul, Reuters reports.

Reuters reports Hall’s pay is a challenge to U.S. “pay czar” Kenneth Feinberg, because it’s not clear whether Feinberg, who was appointed to keep pay for senior bank executives in line, has the authority to do anything about Hall’s pay package. Hall’s deal was put in place before February 11, 2009, the cutoff for Feinberg’s authority over bank pay.