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

BRUSSELS Tue Feb 19, 2013 8:31am IST

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:

Religion and Politics

REUTERS SHOWCASE

Fund Raising

Fund Raising

Flipkart raises $700 million in fresh funding.   Full Article 

Reforms Push

Reforms Push

Modi may order insurance, coal reforms if vote delayed - officials.  Full Article 

Reuters Exclusive

Reuters Exclusive

India looks to sway Americans with nuclear power insurance plan  Full Article 

To Boost Growth

To Boost Growth

Crank up public spending to revive growth - chief economic adviser.   Full Article 

Bold Steps

Bold Steps

SpiceJet rescue plan marks bold bet on Indian aviation recovery.   Full Article 

New Airline

New Airline

Tata, Singapore Air venture Vistara to take off on Jan 9.  Full Article 

Online Sales

Online Sales

Knock knock. Who's there? Amazon's best-selling holiday author.  Full Article 

Hacking Attack

Hacking Attack

N.Korea says did not hack Sony, wants joint probe with U.S.  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage