EU backs US-style limits on bank executive pay

The European Commission encouraged European governments to follow the example of the US by limiting executive pay at financial institutions that receive state support.

The Brussels-based EU executive has in past months approved billions of euro worth of national state aid injected into European banks after the credit crisis that threatened last year to overwhelm the financial sector.

But there is a growing public outcry over executive pay, bonuses and perks that top management in financial institutions still command despite help from taxpayers.

US President Barack Obama took on bailed-out Wall Street firms this week, setting a $500,000 annual cap on pay for top executives at companies receiving taxpayer funds and tapping popular anger over financial sector excesses.

"The Commission very much welcomes this kind of limit placed on the pay and bonuses of executives," Commission spokesman Jonathan Todd told a regular briefing, adding that the limit was "helpful."

Such restrictions were an extra incentive for banks to repay state bailout money, Mr Todd said, though he added it should be up to individual EU countries to decide on possible limits for bank executives' pay.

Highlighting the issue, Spanish bank BBVA said on Thursday it would freeze the salaries of its top executives, while Denmark's Danske Bank said it had cancelled bonuses for its executive board.

The European Commission, which proposes legislation for the 27-nation EU, said in December it did not plan to have a law on the issue.

In October, EU finance ministers approved general principles for banking bailouts, which said "management should not retain undue benefit" in the cases of banks receiving aid.

Some EU leaders and officials including French President Nicolas Sarkozy and Eurogroup Chairman Jean-Claude Juncker, have spoken loudly against fat bonuses and golden parachutes.

Mr Sarkozy has threatened to legislate curbs on executive bonuses, while French employers' group MEDEF has published recommendations which include limiting golden parachutes to two years' pay and scrapping it for managers who have failed.