Bankers' Annual Bonuses
MEPs cap bankers' bonuses and step up bank capital requirements
We have achieved the most comprehensive bank regulation package in the EU
(05.03.13) - Bankers' annual bonuses must not normally exceed their annual salaries and banks must hold more high quality capital to increase stability in the sector, says a deal reached by European Parliament and Council negotiators. The only possible exception, allowing bonuses of up to twice annual salary, would have to be authorised by holders of a half of a bank's shares. MEPs fought for a 1:1 ratio from the outset.
We have achieved the most comprehensive bank regulation package in the EU. Banks will be stabilised and more resistant to crises, said rapporteur Othmar Karas (EPP, AT).
Bonus cap
To curb excessive risk-taking, the basic salary-to-bonus ratio will be 1:1 but could be raised to a maximum of 1:2 with the approval of shareholders. This higher ratio would require the votes of at least 65 percent of shareholders owning half the shares represented, or of 75 percent of votes if there is no quorum.
To encourage bankers to take a long-term view, if the bonus is increased above 1:1, then a quarter of the whole bonus would be deferred for at least five years.
Quality capital
The rules will raise minimum thresholds of high quality capital to be retained. Banks will be required to hold a minimum of 8 percent good quality capital (mostly Tier 1, the lowest-risk form).
Transparency
The legislation would require banks to disclose profits made, taxes paid and subsidies received country by country, as well as turnover and number of employees. From 2014 these should be reported to the Commission and from 2015 made fully public.
Next Steps
The political agreement must be approved by member states and the European Parliament plenary, in which a vote is expected at the 15-18 April session. (Europäisches Parlament: ra)
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