EU ties banker bonuses to performance
01.07.10 @ 09:10
Bankers' bonuses are to be limited following a deal agreed between the European Parliament and EU member states on Wednesday (30 June).
According to the compromise between the two sides, bankers could be awarded no more than 30 percent of a bonus right away.
Half the immediate payment would have to be paid in shares or other securities that, crucially, are linked to the bank's long-term financial performance.
The rest of the bonus would be delayed for three to five years.
For very high pay-outs, bankers could be awarded no more than 20 percent of the bonus.
The agreement, a political deal between member states and MEPs that must still be endorsed next week by the plenary session of the parliament, aims to appear to punish the banking industry for its role in the economic crisis and to end a bonus culture that critics say encouraged reckless risk-taking.
Golden parachutes, or exorbitant severance packages for executives, will also be restricted.
A number of EU countries, including the UK, home to the City of London, a major financial centre, have already imposed bank bonus limits, but Wednesday's agreement covers all 27 member states.
It also covers hedge fund managers, who until now have avoided rules on bonuses.
Bankers will still be able to receive multi-million-euro pay-outs however, as the new rules impose no restrictions on the size of bonuses.
Domestic regulators will be in charge of applying the rules on the national scene.
Fines or other penalties can be imposed on financial institutions if they flout the rules.