Changes voted by Parliament to cap banker’s bonuses to curb speculative risk-taking, step up capital provisions to help banks cope better with crises and stiffen supervision is expected to strengthen EU banks, 1 January 2014 onwards.
This EU banking reform package also aims at making it easier for banks to lend to small firms that drive the economy, and in turn spur growth.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Lead MEP Othmar Karas, said the new set of rules is the "farthest-reaching banking regulation in the EU to date", and the new single rule book for all its 8,200 banks is the foundation on which the EU banking union "must be built".
"The single supervisory mechanism will be the roof. We must now add the walls: the resolution framework for banks and deposit guarantee schemes. As legislators, we do not regulate salary levels. The rules on bankers’ bonuses will instill fairness and transparency and contribute to a change in banking culture."
To curb speculative risk-taking, the basic salary-to-bonus ratio will be 1:1. This could be raised to a maximum of 1:2, if approved by at least 66% of shareholders owning half the shares represented, or of 75% of votes if there is no quorum.
EU banks will be required to set aside more and better capital as a cushion against hard times, i.e. a minimum of 8% good-quality capital, of which just over half must be Tier 1, the highest-quality, lowest-risk form (a doubling of today’s Tier 1 requirement). This capital must be reasonably liquid, i.e. readily convertible into cash needed to pay depositors and creditors in an emergency.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataBanks will also be required to hold a "capital conservation buffer" to absorb losses and protect their capital, and a "countercyclical capital buffer" to ensure that in times of economic growth, they accumulate a sufficient capital base to enable them to continue supplying a stable supply of credit in stress periods.
The legislation will require banks to disclose profits made, taxes paid and subsidies received country by country, as well as turnover and number of employees.
Banks will be supervised by EU member states’ competent authorities, in collaboration with the European Banking Authority (EBA), whose supervisory powers will be expanded.
The CRR was approved by 595 votes to 40, with 76 abstentions and the CRD IV by 608 votes to 33, with 67 abstentions.
