EU lawmakers likely to back bank bonus cap

LONDON Fri May 11, 2012 9:48am EDT

Related Topics

LONDON May 11 (Reuters) - A likely vote by European Union lawmakers on Monday to back some of the world's toughest curbs on bankers' bonuses will add to pressure on member countries to follow suit and quell public anger over huge pay packets in the bailed-out sector.

A proposal to cap bonuses at the same level as a banker's fixed salary will be approved by the European Parliament's economic committee, which will also vote on a draft law to force banks to hold more capital so they withstand shocks without needing taxpayer help again.

"There is enough cross-party support for this to go through," a parliamentary official involved in negotiations on the vote said on Friday.

The EU has already implemented and toughened up new global rules that a large chunk of a bonus must paid over several years in the form of shares and can be clawed back if the performance which triggered the award turns out to have been poor.

EU lawmakers are now looking to cap the bonus, although a push by some lawmakers to limit top salaries at a bank to 40 times the lowest pay packet is not expected to win enough support. Member countries have yet to discuss the issue.

A slew of major international banks have already faced shareholder revolts over executive pay this year and company directors expect to remain under pressure even when the market downturn ends.

The backlash over bankers' pay and the impact of the euro zone crisis on business has already pushed down bonus pots which in London will be almost halved this year at nearly 10 billion pounds, the lowest in a decade.

CAPITAL SURCHARGES

The lawmakers also want to insert into law globally-agreed capital surcharges on the bloc's biggest banks like Barclays , Deutsche Bank and BNP Paribas.

The surcharges of 1-2.5 percent would be on top of the 7 percent core tier 1 minimum capital ratio all banks must have under the global bank capital accord known as Basel III.

Lawmakers will also vote on inserting a rule limiting a bank's exposure to unregulated entities known as "shadow banks" to 25 percent of total exposures.

Parliament has joint say with EU states on the draft bank capital law and so far the bloc's countries have not included any bonus curbs into their own text.

Finance ministers from EU countries meet on Tuesday in a second attempt to reach a deal among themselves on the bank capital rules, before opening talks with lawmakers on a final text that would become law from 2013.

Lawmakers are expected to give countries more flexibility to demand bank buffers that go beyond the Basel minimums.

Britain and Sweden have been pushing for this supervisory wriggle room and EU finance ministers are expected to include similar flexibility in their text as well.

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