Europe set to allow banker bonus cap to hit 250 percent of salary

The European Banking Authority issued a consultation document on Wednesday detailing aspects of a "discount rate" that banks can apply under the European Union`s new bonus rules.

Reuters| Updated: Oct 24, 2013, 10:56 AM IST

London: European bankers could be paid bonuses of up to 250 percent of their fixed pay under a slight relaxation of tough new pay rules due to come in next year, as long as much of the sum is deferred for at least five years.

The European Banking Authority issued a consultation document on Wednesday detailing aspects of a "discount rate" that banks can apply under the European Union`s new bonus rules.

The EU plans to cap bonuses of senior staff to 100 percent of their fixed pay, or 200 percent if shareholders approve a higher payout.

The discount rate would allow banks to pay up to another 50 percent in instruments that are deferred for at least five years.

The UK government and many banks have opposed the EU plan, saying it will see banks ramp up fixed salaries and could see staff leave London for elsewhere. The discount rate has been proposed as a modest concession.

The EBA consultation said the extra pay would depend on a complex calculation based on inflation rates, sovereign bond yields and how long the pay is deferred.

"Whilst the discount provisions may be useful ... they do not seem to be sufficient to prevent banks increasing fixed remuneration in order to stay within the bonus cap without substantially reducing senior employees` overall remuneration. This has the feel of tinkering around the edges," said Andrew Stanger, partner at international law firm Mayer Brown.

Banks are already working on plans to work around the bonus cap. Barclays is considering giving senior staff caught by the rule an additional monthly cash sum, on top of base pay and bonus, to get around the rules and avoid a permanent rise in costs, a person familiar with the matter said on Wednesday.

The EU has said the cap will apply to thousands of bankers in risk-taking positions. The EBA said it will finalise rules on who is affected by the end of March.

Panasonic to slash chipmaking workforce by half: Nikkei

REUTERS - Panasonic Corp plans to dramatically cut back on chipmaking, slashing the business`s 14,000-strong workforce by half and possibly selling some plants, the Nikkei said.

Japanese companies are spinning off their chipmaking operations as profit margins shrink, mainly due to stiff competition from South Korea, the paper said.

The move underlines Panasonic President Kazuhiro Tsuga`s determination to weed out weak operations as he focuses on higher-margin products to end years of losses at the consumer electronics conglomerate.

Panasonic has chip production plants in Japan`s Toyama and Niigata prefectures, as well as in China, Indonesia, Malaysia and Singapore, the Nikkei said.

The job cut will likely affect mainly foreign plants, the paper said.

Expenses resulting from the workforce reduction are expected to reach 50 billion yen for the year ending March, the paper said, adding the company expects to soften the impact of this through improved earnings.

Panasonic`s chipmaking business reported an operating loss of 184 billion yen in fiscal 2012, the paper said.

The company is in talks to sell some plants to Israeli chip manufacturer TowerJazz , the business daily said.

Reuters reported earlier this month that Osaka-based Panasonic will pull out of its plasma TV business by the end of the financial year.

Panasonic agreed last month to sell the healthcare business to U.S. private equity firm KKR & Co in a USD 1.67 billion deal.