By Mark Kleinman, City Editor
Some of London's top bankers are being handed pay rises as European regulators demand restrictions on allowance awards which enable lenders to pay bigger bonuses.
Sky News has learnt that Nomura, the Japanese bank which acquired the European operations of Lehman Brothers after its collapse in 2008, is poised to award backdated fixed salary increases to a handful of its most senior City-based employees.
The awards are designed to align the Nomura executives more closely with the pay of competitors, and are the first confirmation that Brussels' efforts to curtail banks' award of periodic allowances for staff will result in inflating their fixed costs.
The allowances were introduced earlier this year by most of the world's top banks operating within the European Union (EU) after the advent of rules restricting bonuses to 100% - or, with shareholders' approval, 200% - of an individual's salary.
The cap, which has been legally challenged by George Osborne, the Chancellor, prompted banks to introduce monthly or quarterly payments to staff according to their seniority.
The payments count towards the fixed pay element of the bonus cap ratio - enabling the payment of larger bonuses.
However, this week the European Banking Authority (EBA) said it believed that many of the role-based allowances were illegal because they were variable rather than fixed, and demanded that national banking supervisors take necessary steps to outlaw them.
In the UK, the Prudential Regulation Authority gave permission for the allowances to be paid earlier this year, and has yet to respond to the EBA's opinion.
Sky News can also reveal that a number of banks which are due to pay allowances in the coming weeks will continue to do so despite this week's judgement.
Bank of America Merrill Lynch, for example, is understood to be planning to pay the sums to eligible staff in its November payroll, while Morgan Stanley, which pays them on a monthly basis, is also expected to continue doing so.
Barclays and Goldman Sachs are among the other banks which are likely to have to rethink the structure of the allowances if the PRA accedes to the EBA's demands.
The Treasury is opposing the EU bonus cap because it argues that it undermines the status of London as Europe's most important financial centre.
Nomura, BAML, Barclays, Goldman Sachs and Morgan Stanley all declined to comment.
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