The bloc’s parliament and member states are approving a draft law to implement Basel III, global rules to toughen up bank capital and liquidity requirements from 2013 to plug regulatory gaps highlighted by the financial crisis.
EU lawmakers want to include extra elements that are not part of Basel III, such as tougher curbs on bankers’ pay and capital surcharges agreed at the global level for very big banks.
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The finalized guidelines for national financial regulators are virtually unchanged from the draft rules circulated in October.
The rules would mean that bankers receive only 20-30% of their bonuses in immediate cash.
One lawmaker has proposed variable pay should not be more than double fixed salary. Another said there was cross-party backing for using the draft law to implement a capital surcharge agreed by the G20 on 28 of world’s biggest banks from 2016.
The guidelines could mark a profound change in the City bonus culture. In the past, star performers have been able to negotiate big pay deals by threatening to quit and work for a rival bank.
But the new rules mean that any banker that did leave would forfeit years-worth of deferred bonus payments.
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By GlobalDataThe European crack-down comes amid continued anger over bankers’ pay. In January RBS chief Stephen Hester refused to take up a GBP1 million bonus amid mounting political pressure not to take the controversial payment.
UK bank Barclays chief executive Bob Diamond took home pay, shares and benefits worth GBP17 million pounds last year. Credit Suisse Group chief Brady Dougan took a more than 50% pay cut, as the bank’s profit slumped, to earn a total CHF5.8 million (US$6.3 million) in salary and share-based bonuses.
WealthInsight is of the opinion that any crackdown, discussed at a high level meeting between Europe’s top financial watchdogs in London, would put Britain at loggerheads with European partners.
The Financial Services Authority (FSA) is vehemently opposed to setting a ceiling on bankers’ pay, which it believes could confer huge advantages on US and Asian banks.
And the watchdog fears firms could quit the UK if the EU-wide Committee for Banking Supervisors goes ahead with the proposals, which could be unveiled as soon as today. Curbing cash bonuses, staggering awards over a number of years and introducing measures to claw back unearned awards should be enough to snuff out reckless risk taking, the FSA argues.
The planned clampdown comes as the European Commission throws its weight behind a financial activities tax on bank profits and pay, which could raise as much as GBP22billion a year.
