UK has three times as many high paid bankers as rest of EU combined

Figures from the European Banking Authority (EBA) have shown that the UK had more than three times as many financiers earning over €1m (£800,000) per year as the rest of the EU combined. The data revealed that the number of extremely high earning bankers rose 21.6% across the EU to 3,865 in 2014. 2,429 of these worked in investment banking. This was the first year when the EU bonus cap was in operation and new reporting rules applied. The increase was driven by a 40% increase in individuals receiving such high pay in the UK. Removing currency influences would reduce this increase to 16%. In Germany, the number of high-earning financiers fell, whilst figures remained stable in all other countries. 

The number of City financiers who were paid more than €1m (£800,000) per year jumped to nearly 3,000 in 2014, with one earning up to €25m.

The European Banking Authority (EBA) said the UK, with the Europe’s biggest financial centre in London, had more than three times as many high-earning bankers as the rest of the EU combined.

Critics of high pay said the soaring wages showed little has been learned from the financial crisis.

The regulator’s data showed that the number of high earners across the EU rose 21.6% to 3,865 in 2014, from 3,178 in 2013. The majority – 2,429 – worked in investment banking. It was the first year when the EU bonus cap was implemented and new EBA rules on banks reporting staff remuneration took effect.

The overall increase was driven by a 40% leap in the number of high earners in the UK, to 2,926 from 2,086, which partly reflected exchange rate effects as most City bankers are paid in sterling.

Stripping out currency effects, the increase would have been 16%, or 339, more high earners in the UK. The EBA put this down to banks making higher net profits.

The soaring number of high earners drew criticism from the Trades Union Congress, which said the increase did not reflect the economic reality for most people.

“These are staggering numbers – for parts of the banking sector, it’s like the credit crunch never happened,” said a spokesman.

“It would be easier to understand if there was evidence that the activities of the banks were supporting stronger growth, stronger manufacturing, higher productivity and better wages across the board.

“But instead the economy has seriously underperformed across all these areas.”

Paul Marsland, deputy director of the High Pay Centre thinktank, said efforts to address risky behaviour in the financial world were having little effect.

“It’s no surprise really to see London, as the main financial centre in Europe, with the heaviest number of people covered by these regulations,” he said.

“But it is a surprise to see the numbers increasing at the rate they are, given that the rules that have given us this information are aimed at jobs with an element of risk-taking.

“The fact that these are predominantly investment banking jobs seems to suggest that the riskier nature of their work is alive and kicking. Given the uncertainty of the economic climate, it’s a surprise to see that expanding.”

In Germany, the number of high-earning bankers fell to 242 from 397, mainly due to a decline at subsidiaries or branches of UK firms in Germany. In all other countries, the number remained broadly stable.

The London-based regulator’s data showed 16 people at financial firms based in Britain were paid more than €10m in 2014, with one earning €24m-€25m.

Since the bonus cap was introduced in 2014, limiting bankers’ bonuses to 100% of salary, or 200% if shareholders approve, the UK and France have implemented waivers.

The UK has excluded hundreds of smaller, less risky firms such as asset managers and brokers, the EBA found in December, and supports amending the EU directive to exclude small firms from the bonus cap across the trading bloc.

Development of the number of high earners and EUR-GBP exchange rate. Illustration: EBA

The regulator said the introduction of the bonus cap had led EU banks to shift remuneration towards fixed salaries. As a result, the average ratio between variable and fixed pay for high earners more than halved to 127% in 2014 from 317% in 2013.

This had little impact on banks’ costs and financial stability, the regulator found, contrary to the fears they voiced ahead of the change.

The EBA’s Bernd Rummel said: “The banks said during the consultation of EBA guidelines that the bonus cap would be very negative for them in terms of cost flexibility and financial stability.

“We analysed this and found that there was only a small increase in the fixed administrative cost. There was no big impact on the financial stability or cost flexibility.”