Fears over banks exodus diminish as European regulators offer bonus concession

By SIMON DUKE FOR MAILONLINE
Updated: 16:58 EST, 10 December 2010

European regulators have watered down new bonus rules in a move that will allay fears over an exodus of big international banks such as HSBC from the UK.

Under an original plan to curb excessive banking pay, European lenders would have had to apply tough new restrictions on cash bonuses to all their staff around the world.

Bank bosses, including incoming HSBC chief executive Stuart Gulliver, warned that European banks were in danger of losing out to more loosely-regulated Asian and US rivals.

Promotion: Lebanon-born Samir Assaf is the new head of HSBC's investment banking wing

But following a lobbying campaign, European banks will now be able to work under local rules when setting pay levels in more lightly regulated financial centres, such as Hong Kong.

Banks will be free to 'take into account local regulations' in overseas subsidiaries, the Committee for European Banking Supervisors - an EU watchdog - ruled yesterday.

The concession came after Standard Chartered, HSBC and Barclays all warned they would consider moving their headquarters off-shore if the regulatory crackdown were too harsh.

Last month Gulliver said: 'In places like Hong Kong, Brazil, India we find it very hard now to compete against the American and local banks because they're not subject to the same rules.' HSBC was missing out on key hires in Hong Kong as, under UK rules, it was barred from offering two-year guaranteed bonuses, which are standard in the former British colony, he said.

Despite the climbdown, the EU's bonus framework remain far tougher than the restrictions in place in Asia or the US.

In a move aimed at stamping out reckless risk-taking, bankers based in the EU will receive just 25 per cent of their annual bonuses upfront and in cash, with the remainder spread out over a minimum of three years. The EU rules will apply to the forthcoming 2010 bonus round.

The new guidelines were published as HSBC promoted a Lebanese emigre to the head of its investment banking wing, which has become the group's main growth engine in recent years.

Samir Assaf will replace the division's long- standing boss Gulliver, who is taking over from Mike Geoghegan as chief executive-in January. The new head of HSBC's global markets and banking is a 50-year-old Lebanon-born French citizen, said to be the antithesis of the brash testosterone-fuelled staff who populate City dealing rooms.

Those who have worked with the softly-spoken Assaf said he is 'unusually academic and intellectual' for an investment banker.

A refuge from war-torn Lebanon in the 1980s, Assaf has degrees from the L'Institut d'Etudes Politiques and the Sorbonne.