The cap restricts bonuses to 100% of banker's pay or 200% with shareholder approval. The cap is designed to avoid bankers taking excessive risks but critics say it will push up basic pay.
The UK government challenged the legislation asking the Court of Justice in Luxembourg to consider arguments challenging both the scope and the legal basis for the new rules.
The Advocate General's opinion is not legally binding, but the Luxembourg court may consider his reasoning in reaching its verdict and it is rare for the final judgment to diverge from the AG’s opinion.
Some banks have already forestalled the issue by raising base salaries but one might think this cannot help the competitiveness of EU financial markets against other key markets in the US and Asia.
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