European rules to cap bankers' bonuses at twice fixed pay are "a retrograde step" that could add to difficulty in recruiting staff to the industry, the head of Europe's biggest bank HSBC said on Tuesday.
Europe has said banks can only pay bonuses to staff equivalent to twice their fixed pay and last week said new 'allowances' introduced by many to meet the rules counted as variable pay, so would need to be restructured again. Banks say changes already made would reduce risk-taking by staff, with bonuses to be paid in future years or potentially taken back.
"The proposals out of Europe in terms of capping the ratio of variable to fixed (pay) is a retrograde step against long-term deferral," Douglas Flint, HSBC chairman, told UK lawmakers on Tuesday.
"Hopefully we'll find a balance over the coming months and years to readdress that, because it's terribly important that we have a balanced framework that protects the system from excessive risk taking, which deferral and clawback does, but at the same time isn't so uncertain that we find it difficult to attract people into the industry."
Europe's banking regulator has said it will issue more comprehensive guidelines next year on remuneration practices.
Flint said it can be difficult to attract people into the industry.
"When you say to someone in the tech industry that you'd like them to join banks to help with cyber risk, and say your money will be paid in seven years time ... it's an easy conversation - they decline to consider it," he said.
Flint was being quizzed on regulatory issues by the House of Lords EU Economic and Financial Affairs sub-committee. He said UK rules to force banks to separate their domestic retail banking operations, known as ringfencing, will be expensive to implement at HSBC.
"Ringfencing will cost a billion or 2 billion (pounds) to implement ... it is very significant," he said.
Flint said one of most troubling areas of European regulation was the attempt to impose rules overseas.
"I was disappointed to see it regulate remuneration globally, for banks headquartered in Europe, because it seems to me that what is done in the subsidiaries in Latin America and Asia should not necessarily be tied to European laws," he said.
HSBC, which operates in 74 countries, has previously said that puts it at a disadvantage when competing with U.S. and Asian rivals in overseas markets.
"Where they go extraterritorial and say you've got to comply with our rules as well as someone else's, you end up with a choice of who's law you break, and that is a very uncomfortable one," he told the lawmakers.
