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:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

Sensex, Nifty rise to second consecutive record high

Sensex, Nifty rise to second consecutive record high

The BSE Sensex and Nifty on Friday rose to their second consecutive record highs. The 30-share Sensex surged as much as 1.3 percent to an all-time high of 27,706.80. The broader Nifty gained as much as 1.28 percent to a record of 8,275.15.  Full Article 

REUTERS SHOWCASE

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Airtel Profit Jumps

Airtel Profit Jumps

Bharti Q2 net profit more than doubles   Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Maruti Earnings

Maruti Earnings

Maruti Suzuki net profit up 29 percent, beats estimates.  Full Article 

ICICI Results

ICICI Results

ICICI Bank Q2 profit up 15 percent, beats estimates.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

End Of QE

End Of QE

U.S. Fed ends bond buying, exhibits confidence in U.S. recovery.  Full Article 

Cook Comes Out

Cook Comes Out

Apple's Cook: "I'm proud to be gay"  Full Article 

Refining Margins

Refining Margins

BPCL aims to double refining margins with refinery expansion.  Full Article 

Reuters India Mobile

Reuters India Mobile

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