* EBA to allow exclusions from cap in "justified cases"
* Exclusions can be vetoed by regulators
* Flexibility means up to 12,000 might escape cap
LONDON, Dec 13 (Reuters) - Bankers in the European Union earning over 500,000 euros ($688,000) a year could be excluded from a cap on their bonuses if they are not major risk takers, according to a revised rule from the bloc's banking watchdog on Friday.
Faced with public anger at banking excess, the EU approved a cap on bankers' bonuses, limiting them to no more than fixed annual salary, or double that amount with shareholder approval.
The cap will take effect on bonuses awarded for performance in 2014 and being handed out in early 2015.
The European Banking Authority is responsible for implementing the cap and on Friday published its final rule which introduces flexibility for some bankers to escape the net "in justified cases".
"Institutions will have to... demonstrate that the excluded staff on the basis of the business unit they are working in, as well as of their duties and activities have indeed no material impact on the institution's risk profile," EBA said.
Based on EBA figures, flexibility introduced into the final rule means that up to 12,000 bankers might escape the cap.
Under the original draft, bankers earning over 500,000 euros would automatically be affected, even if they did not meet EBA's criteria for risk taking.
The final rule no longer includes this automatic trigger based on salary, and incorporates a new system of supervisory scrutiny for those high earners wanting to be excluded.
A bank will have to inform its local regulator about staff earning between 500,000 and 750,000 euros and who are being excluded from the cap. The regulator can challenge them.
Those earnings over 750,000 euros will need prior regulatory approval to be excluded, while the EBA must be informed about regulatory approval for exclusions for those earning over a million euros.
The final rule also requires banks to identify material risk takers even if they don't trigger any of the criteria EBA sets out in the rule. The aim of this is to avoid some key risk takers escaping the net.
Most of the bankers that will be hit by the cap are based in London, and Britain is challenging the cap in the EU's highest court.
Even before the ink of Friday's final version of the rule is dry, banks are already taking steps to circumvent it, such as by bumping up fixed pay or looking at payments of extra "allowances" on top of basic salaries.