* Push for 2:1 variable-to-fixed bank pay cap
* Cross-party backing for big bank capital surcharge
* Support for wider range of assets in liquidity buffers
By Huw Jones
LONDON, March 27 Bankers' bonuses should be
capped at twice their basic pay and "golden hellos" handed back
if performance disappoints, European Union lawmakers said on
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
"My approach is that variable pay should not be more than
double the fixed," said Othmar Karas, an Austrian centre-right
lawmaker who is steering the measure through parliament.
"We should not do more than necessary and not become
populist. A fixed upper limit on remuneration would prevent
people from doing a good and responsible job," Karas told a
webcast meeting in Brussels.
EU financial services chief Michel Barnier, who authored the
draft law, has already signalled his backing for a ratio between
fixed salary and bonus, but others wanted to go further.
Belgian Green Party member Philippe Lamberts said there was
no evidence that salary structures seen at banks like Deutsche
Bank or Societe Generale "correspond to any
real value creation".
"I am getting fed up of people saying this issue is populist
and we should not go into that. Variable salary cannot be bigger
than fixed salary," he said.
"Don't tell me you need two-fold, three-fold, five-fold
variable salary to do good work. This is false," Lamberts said.
Banks have come under fire for failing to show restraint on
pay for executives and top staff when thousands of jobs are
being cut and wages slashed or frozen in the wider economy after
a recession many blamed on them.
U.K bank Barclays Chief Executive Bob Diamond - one
of Europe's highest-paid bankers - took home pay, shares and
benefits worth 17 million pounds ($26.9 million) last year.
Credit Suisse Group AG chief Brady Dougan took a more
than 50 percent pay cut, as the bank's profit slumped, to earn a
total 5.8 million francs ($6.3 million) in salary and
In 2010, parliament pushed through the current set of EU pay
curbs on banks which already go beyond principles agreed by the
G20 group of the world's top economies.
However, banks have already begun to skirt around the
current curb on how much of a bonus can be paid upfront in cash
by bumping up basic salaries.
Sharon Bowles, British Liberal chairman of the parliament's
economic affairs committee also proposed that "golden hellos" -
a big cheque bankers receive to lure them from a rival - would
be clawed back or returned if performance fell short.
One of Barnier's officials told parliament the EU executive
was "certainly prepared to examine with you a number of possible
improvements to the remuneration principles".
Karas said there was also cross-party backing for using the
draft law to implement the capital surcharge the G20 has agreed
to impose on 28 of the very biggest banks in the world from 2016
which will be on top of Basel's 7 percent minimum core capital.
But French centre-right lawmaker Jean-Paul Gauzes warned
that including the surcharges in the EU law could put European
banks at a competitive disadvantage to their global peers.
Several lawmakers supported widening the Basel III criteria
for assets that can be included in new liquidity buffers banks
must build up to withstand a month-long credit crunch.
EU president Denmark has also proposed such as step and the
Basel Committee, which authored the Basel III agreement, is
debating greater flexibility.
At present, most of the buffer must be in top-quality
government debt, the rest mainly in highly rated corporate
bonds. But countries like Denmark want to include assets like
mortgage-backed covered bonds.
Lawmakers have tabled 2,195 amendments to the draft law that
will be voted on in committee on April 25 or 26.
Parliament then wants to vote on a first-reading deal with
EU states in June to give the European Banking Authority enough
time to flesh out implementing measures in time for the January
2013 start date agreed globally for phasing in Basel III.