Thursday

23rd Jan 2020

MEP calls for end to massive bank bonuses

  • MEPs want to limit bankers' bonuses to their fixed salaries. (Photo: Matt Buck)

Austrian centre-right MEP Othmar Karas has called for an end to massive bankers' bonuses, which in some cases amount to 10 times the basic salary.

"We are looking at a set limit," Karas told the parliament's economic affairs committee in Brussels on Thursday (12 April). He explained that under his model, bonuses should not surpass a ratio of one-to-one on fixed salaries.

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The highest paid banker in Europe in 2011, according to Financial News Online, is Mike Rees, who is the head of wholesale banking at Standard Chartered.

Company accounts show that Rees has a base salary of €836,000 but received a €3 million bonus, a deferred share award of €4.5 million and a ‘performance share’ allocation worth some €1.67 million. In total, Rees earned over €10 million in 2011.

The head of global banking and markets at HSBC took in €9.34 million. His base salary is €787,000.

Karas' proposals are potentially to be introduced into the capital requirements directive, adopted in 2006 and currently under its fourth review by the European Commission.

World leaders in response to the 2008 banking crisis already agreed in 2010 to tougher bank rules - known as Basel III. Basel III aim to tighten banks' capital and liquidity rations from 2016 and includes measures on salaries.

But a global agreement on how to regulate bankers' bonuses still remains elusive, raising the threat that if the EU gets too tough, companies will relocate.

A survey released on Thursday by the London-based European Banking Authority also noted that some bankers receive bonuses 10 times higher than their fixed salaries.

The report noted that most member states leave it up to the institutions to impose a set internal maximum ratio. The highest reported rations were 429 percent for executives and 904 percent for "other identified staff."

The report concludes that in all member states "the variable part of the remuneration exceeds the fixed remuneration considerably for all identified staff."

In a note which sheds light on the risky trading which led to the 2008 crash, it added that these variables increase proportionally to the amount of risk taken by the staff. The higher the risks taken, the greater the bonuses. The report warns that such remuneration tactics could "incentivise staff to take too much risk in order to assure a certain minimum pay level."

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