EU seeks deal on fixed-salary cap for bankers' bonuses
February 19, 2013 11:21 AM EST
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)
Most Popular Slideshows
- Still The World Champions: Team USA Overpowers Serbia, 129-92 To Win 2014 FIBA World Cup [PHOTOS]
- Pope Francis: World War III Has Started On Piecemeal
- After Win Over Maidana, Mayweather Says He Is Prepared To Negotiate A Fight With Pacquiao
- From Fat To Fit: Celebrities Who Were Overweight Before They Became The Beauties That They Are
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- iOS 8 Release Date Of Sept 17 Has Arrived: Update Begins At 10AM Pacific Time, Upgrade Your iDevices With iOS 7.1.2 First To Install iOS 8
- Pregnant Kate Middleton May Call Off Malta Trip Due To Sickness: Royal Couple Will Move To Anmer Hall Residence
- Apple iPad Air 2, iPad Mini 3 October Release Date Roundup: Freshly Leaked Protective Case Debuts Unique Vent Alongside Camera
- Why Samsung Galaxy S5 Is Not The Best Smartphone To Purchase Now? If You Still Want To, Wait For A Month To Get It Cheap
- Ukraine Crisis: Poland Denies Supplying Weapons To Kiev
- Google Nexus 8 Release Date Countdown Begins Oct 8: 8 Killer Specs and Features to Expect
- Malaysia Airlines Flight MF 370: Indonesian Police Chief Claims He Knows What Happened To Missing Jet