Stop pretending the EU bonus rules have made much difference, Mr Barnier

Michel Barnier's leaked letter in the FT this morning, which suggests that the US still has an advantage over Europe when it comes to bonus payments, assumes that the Committee of European Banking Supervisors (CEBS) rules implemented early this year have had a noticeable effect on pay.

In reality, this is a slightly lofty claim.

While the draft CEBS proposals promised a draconian crackdown on banker pay, the eventual rules, while complex, were decidedly less onerous.

Two year guarantees have been ruled out - although this also seems likely in the US once the SEC finalises its Dodd-Frank governance requirements - but one year guarantees are allowed in the EU in exceptional circumstances and the larger deferrals and high stock elements of bonuses in the EU are limited to a small number of 'code' staff. RBS has 300 of them, HSBC has 280 and BarCap has 231, for instance.

Rumour has it that some banks are even considering reducing salaries now that they've realised bonus regulations are not as burdensome as they initially thought.

If the CEBS rules were really that onerous, we'd have seen an exodus of staff from the US and Asian operations of EU-based banks. In the EU, all banks are covered by the rules. However, in Asia and the US, only banks with their headquarters in the EU must adhere to the CEBS requirements. If these requirements were really awful, bankers would surely be leaving the likes of BarCap, Deutsche and BNP Paribas for Goldman, JPMorgan and Morgan Stanley.

So far, there hasn't been much sign of this. Most of the departures in the US seem to have been from UBS. And those exits are more attributable to the poor business environment and increased capital requirements than anything to do with restrictions on bonuses.