The reason is that variable remuneration – the one Europe wants to put a limit on- is much lower than the fixed in Spain, in opposition to what happens in other countries, especially in the Anglo-Saxon bloc.
However, we should bear in mind that the variable pay fell by much in 2012 due to the banks’ bad numbers (the Santander bank being one of the best examples). Limitations may indeed be an obstacle whenever the financial sector leaves the crisis behind.
Members of the Ecofin studied on Tuesday the proposal agreed by the European Parliament and the Commission. Although they did not completely agree, their positions were close. The proposal did not mention specific figures, but a general limit on the variable remuneration bankers could get: the bonus shall not exceed twice their fixed salary. Besides, the variable could be reduced by up to 25% given that it is paid in 5 year deferred bonuses.
But none of this will affect Spanish big bankers, since their variable salary is never more than twice the fixed remuneration -already very high in almost all case. Santander’s Managing Director, Alfredo Sáenz (the highest-paid executive in the sector), claimed last year 8.2 million euro, of which 3.5 correspond to variable and the rest to fixed. In fact, variable was reduced by 50%, which meant a 29% reduction of his total salary. The President of the entity, Emilio Botín, claimed 3 million euro in total (32% less in 2011), of which 1.4 were variable. His bonus reduction was lower than the rest of the members of the board’s, of 25.2%. For this reason, some executive’s variable outperforms the fixed remuneration, but never in a two-to-one ratio: 9.9 million in salary and 11.3 million as variable remuneration.
As for BBVA, Francisco González pocketed last year 4.1 million in cash and shares (20.4% less than the previous year) of which 1.96 million were fixed remuneration. Variable was divided into one million in cash and 1.15 million shares (155.479 bonds). Its CEO, Ángel Cano, received 1.75 million of fixed salary, over 636,000 euro variable in cash and 736.000 in shares; a total of 3.12 million, which represent a 16.6% reduction.
CaixaBank President Isidre Fainé claimed 2.67 million last year, almost the same as in 2011, despite the fact that the benefit of the third Spanish bank fell by 78.2%. All that was fixed salary, no variable. His VP, Juan María Nin, pocketed 2.59 million (he worked in the bank only for six months), and CaixaBank does not disclose what proportion is fixed or variable.
Sabadell Bank has not published its results yet, but in the middle of last year it announced that earnings would be the same as in 2011: 2.05 million for the President, Josep Oliu, divided into 1.55 million in salary and 525.000 in variable; and 1.8 million for the CEO, Jaume Guardiola, of which 1.25 million are fixed retribution and 500,000 are variable remuneration (both enjoy some extras).
Finally, the President of the Popular, Angel Ron, did not get any variable salary in 2012, as well as the rest of the members of the board due to the entity’s losses. He received 1.23 million (11% less than the previous year), a million in fixed remuneration and the remaining 230,000 euros as a bonus for his position. Bankia’s President José Ignacio Goirigolzarri has had his salary limited as the bank was bailed, but he got 500,000 euro instead of the 300,000 through Bankia, where the State is not the main shareholder (until the next capital increase), instead of through BFA, which belongs 100% to the FROB.
Pension plans, the big loophole
When earnings start to spike, something that should happen this year if Brussels new regulations allow it-, variable’s proportion in banker’s salaries will be greatly increased, and then EU economy ministers’ action will have more relevant consequences. New rules can cause lots damage to the Spanish bankers in their pension schemes, where they accumulate large sums.
Once again, Alfredo Sáenz is on top of the list, with a pension plan that has already reached 88.1 million, followed by Botín with 25.5. Ángel Cano can’t complain either, with 22.7 million, of which 6 were from last year. We will have to wait to see if the new European regulation (which will serve to establish in Basel III solvency rules) includes the concept of variable within these contributions.
UK, alone again
Ecofin debate ended without an agreement on Tuesday due to the United Kingdom’s opposition. London believes that limitations would only increase fixed salaries to compensate the variable’s limits and this it would mean increasing costs for financial institutions that would be difficult to eliminate in times of crisis. However, the British government remained alone, so it is almost certain that the rules will go forward. Executive bonuses of British banks in Asia or the US will also be limited. UK’s only victory can be delaying the new rules implementation until June 2014.
Spain is in favor of this measure, but the Minister Luis de Guindos said he also supports limiting banker’s fixed remuneration, as well as increasing transparency and controls on banker’s salaries. De Guindos defends a more active role of shareholders in fixing retributions. In addition, the Bank of Spain has sent a detailed report to the Ministry of Economy about the remuneration of those managers of banks that have received public money.