Tuesday

22nd Aug 2017

MEPs confirm bank bonus cap

  • Bank bonuses will be capped from 2015 under new EU rules (Photo: Fotolia)

Bank bonuses in the EU will be capped from 2015, as part of banking sector reforms backed by MEPs on Tuesday (16 April).

Deputies in Strasbourg backed a regulation capping the majority of bonuses at the same level as salary with an overwhelming 595 to 40 vote majority. Bonus payments up to twice the size of salary would require the majority approval of shareholders.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Following the vote, European Commission chief Jose Manuel Barroso said that the cap would "put an end to the culture of excessive bonuses, which encouraged risk-taking for short-term gains".

Although MEPs inserted the bonus cap during negotiations with government ministers, the legislation was initially intended to put the global capital requirements regime proposed by the Swiss-based Bank of International Settlements (BIS) into EU law.

Banks will be required to hold at least 8 percent of top-rated capital on their balance sheets starting in January 2014. Meanwhile, institutions posing a "systemic risk" will be required to hold an extra 3.5 percent of capital. National governments will also be able to require their banks to hold more capital, a key demand of the UK during the negotiations.

Insufficient capital to withstand losses, together with a sudden collapse in liquidity when the money markets seized up, is widely seen as major cause of the 2007-9 banking crisis.

The legislation will also require banks to disclose profits made, taxes paid and subsidies received country by country, as well as turnover of employees. From 2014 these should be reported to the Commission and from 2015 made fully public.

Othmar Karas, the Austrian centre-right MEP who piloted the reforms through Parliament, described them as "the farthest-reaching banking regulation in the EU to date."

"The new single rule book for all its 8,200 banks is the foundation on which the EU banking union must be built," he added.

The new rules also mark the first time that the UK, which has the largest financial centre in the EU, has been outvoted on financial regulation since the 2009 European elections. For their part, all bar two of the Conservative MEPs abstained in the final vote in protest against the bonus cap. Banks have warned that the bonus rules could leave them unable to attract the most talented financiers.

However, Sharon Bowles, the Liberal Democrat chair of the Economic and Monetary Affairs committee (ECON), backed the deal, commenting that it would "make our banking sector more resilient and brings us in line with international standards."

MEPs have already signalled their intention to apply bonus caps to other areas of the financial sector. Last month, the economics committee voted to cap bonuses for hedge fund managers.

EU finance ministers are expected to put their 'rubber stamp' on the regime in the coming weeks.

UK isolated as EU ministers agree bank bonus cap

London has been left isolated in its opposition to bank bonus rules, with EU lawmakers set to agree to cap payments, ignoring last minute opposition from UK finance minister George Osborne.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

News in Brief

  1. Austria has begun checks at Italian border
  2. Slovenian PM: Brexit talks will take longer than expected
  3. Merkel backs diesel while report warns of economic harm
  4. UK to publish new Brexit papers this week
  5. Macedonia sacks top prosecutor over wiretap scandal
  6. ECB concerned stronger euro could derail economic recovery
  7. Mixed Irish reactions to post-Brexit border proposal
  8. European Union returns to 2 percent growth

Stakeholders' Highlights

  1. European Jewish CongressEuropean Governments Must Take Stronger Action Against Terrorism
  2. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  3. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  4. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  5. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  6. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  7. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  8. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  9. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  10. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  11. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  12. ACCAAnnounces Belt & Road Research at Shanghai Conference