* EU talks make progress, fresh meeting on Tuesday
* Capital rules would start a year late in January 2014
* Preliminary deal to cap bonus at twice banker's salary
* Basel Committee also meeting to discuss liquidity rule
By Huw Jones
LONDON/BRUSSELS, Dec 13 The European Union is
close to a deal over tougher capital rules for banks after
officials struck a series of preliminary agreements, including
to introduce the rules in January 2014 and to cap bankers'
EU states and the European Parliament met in Strasbourg,
France, on Thursday and failed to agree an overall deal on a law
to implement so-called Basel III rules, which require banks to
hold more capital as a buffer against business setbacks.
However, progress was made and a spokeswoman for the
parliament said there would be a further meeting on Tuesday to
iron out remaining issues.
"We are on the cusp of an agreement," Othmar Karas, the
Austrian centre-right lawmaker steering the measure through
parliament, told Reuters after the meeting.
The progress came on the same day EU governments reached a
landmark deal to give the European Central Bank new powers to
supervise banks, boosting confidence in the bloc as it enters
the fourth year of a debt crisis.
The Basel III rules are part of a drive by regulators across
the world to prevent a repeat of the 2007-09 financial crisis.
They would force the EU's 8,000 banks to triple the amount of
capital they hold compared with before the crisis, in the hope
that would make them strong enough to cope with market shocks
without the need for a repeat of taxpayer-funded rescues.
World leaders agreed in 2010 that Basel III should be phased
in over six years from January, but that deadline is already
unfeasible in both Europe and the United States as banks and
governments squabble over the details.
The delay in implementing Basel III means banks and
investors are left in the dark for longer about the exact impact
of new rules on future profitability as actual laws are likely
to diverge in some respects from the Basel accord.
The EU negotiations on Thursday tentatively settled on a
January 2014 start, a parliamentary source said.
The EU's 27 states were represented by the bloc's president,
Cyprus, and the elements agreed at the meeting could still be
thrown out by member states next week. The parliament aims to
vote on a final deal in February.
One key hurdle to a deal has been parliament's insistence
that a bonus should be no more than a banker's salary, further
tightening EU restrictions on bank pay which are already the
toughest in the world.
But lawmakers gave some ground on Thursday.
Bonuses would still be no more than the salary but, with
shareholder approval, could go up to twice that level.
"A 1 to 1 bonus to salary ratio should be the norm but
shareholders can take it to 2 to 1," Karas said.
However, two thirds of a bank's shareholders would have to
be present for a vote on higher bonuses, he added.
Alex Beidas, a partner who specialises in employee
incentives at Linklaters law firm said the compromise was still
far more restrictive than banks had hoped for but there may be
ways around it.
"The other glimmer of hope is that the proposal refers to a
cap on the bonus rather than variable pay. This could mean that
banks are not restricted from granting other forms of pay to
staff such as share awards," Beidas said.
The deal on bonuses came after parliament agreed to member
states' insistence on implementing other elements of the Basel
accord - a balance sheet cap and long-term liquidity buffer -
through new legislation, which could be shaped by governments,
rather than delegating the task to the European Commission.
Britain has lobbied to give local supervisors leeway to
impose capital requirements well above Basel's minimum of 7
percent of a bank's risk-weighted assets.
Thursday's talks tentatively agreed to allow a total buffer
of up to 15 percent overall or 8 percent above the Basel
minimum, a parliamentary source said.
Separately, the global Basel Committee, which wrote Basel
III, is meeting to discuss easing its planned liquidity buffer
as economic conditions remain tough.
It is not clear if the committee will issue a statement on
Friday or wait until its conclusions have been signed off by its
oversight body which is expected to meet next month.