EU seeks deal on fixed-salary cap for bankers' bonuses

BRUSSELS Tue Feb 19, 2013 12:10am GMT

File picture shows European Union member states' flags flying in front of the building of the European Parliament in Strasbourg, April 21, 2004. REUTERS/Vincent Kessler/File

File picture shows European Union member states' flags flying in front of the building of the European Parliament in Strasbourg, April 21, 2004.

Credit: Reuters/Vincent Kessler/File

Related Topics

BRUSSELS (Reuters) - Bankers' bonuses could be pegged at no more than their annual salaries if European Union lawmakers and member states reach agreement in key talks on Tuesday.

Representatives from European Union states and the European Parliament are meeting to thrash out a deal on an EU law to implement a global bank capital accord known as Basel III, the world's regulatory response to the 2007-09 financial crisis.

Without the law, Basel III - which was due to be phased in from January - cannot be implemented.

The negotiations have dragged on because the European Parliament, in response to anger from investors and the public over the role played by banks in the financial crisis, also wants to peg bonuses to no more than annual fixed pay, a provision not in the Basel accord.

Member states had failed to agree on this until last Thursday when ambassadors from the 27 EU states gave Ireland, holder of the bloc's rotating presidency, a mandate to negotiate a cap after Britain failed to muster enough support to block one.

Pressure is building on Europe to finalise the rules after the United States said last week that its own version of Basel III would be ready in the spring.

Banks, many of which have had to be propped up with state aid, have not wanted to speak about bonuses at a time when people are tightening their belts amid government spending cuts.

Though social activists have been clamouring for a bonus cap, Isabel Pooley, a lawyer at CMS Cameron McKenna, said that it could backfire.

"The outcome is likely to be the opposite of what politicians desire: an increase in the fixed element of pay, which is not risk-adjusted, rarely falls when performance is poor and cannot be clawed back," Pooley said.

Banks, some of which have already increased fixed salaries ahead of a possible cap, will be waiting to see in what circumstances the strict 1:1 bonus-to-salary ratio could be breached.

The European Parliament agrees that a 2:1 ratio could be allowed if backed by a majority of a bank's shareholders. Britain, however, has suggested that a simple majority of shareholders present at a bank's annual meeting could determine what ratio should be set.

Any deal on Tuesday would need endorsement from member states and full parliament.

(Reporting by Huw Jones in London and Claire Davenport in Brussels; Editing by David Goodman)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
2writestoo wrote:
How about a cap on Euro MP’s and heads of councils expenses. For example the two unelected men who no one had ever heard of, (and the majority still have not) Herman Van Rompuy The President of the European Council and Manuel Durão Barroso President of the European Commission both of these paper pushers are ladled out salaries of €298,495.44 from the Euro slush pot whilst at one and the same time allegedly receiving almost the same amount in expenses. That is £ one million a year and these people have the audacity to complain about public sector payments. Any organization which need to run to two Parliaments serving the same function at one and the same time (at the cost of billion) should put its own Strasburg stupid house in order before making accusations of greed and corruption in the banking sector. The European parliamentary edifice in France serves no purpose other than to feather the nests of the French and lend credence to French propaganda which proclaims that they are still Europe’s top dog. However the truth is France is Germany’s pet poodle and the only Europeans not too recognize this are the French.

Feb 19, 2013 8:15am GMT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.