Wednesday

13th Dec 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 for a 30 day free trial.

  1. €150 per year
  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.

Commission wants more centralised eurozone by 2019

EU leaders will discuss at their summit next week the commission's proposals, which include a European Monetary Fund and an EU finance minister - but no eurozone budget, as proposed by French president Emmanuel Macron.

News in Brief

  1. EU bank delays gas pipeline decision
  2. Hungary's leftwing parties join Jobbik in anti-Orban protest
  3. Barnier: EU will not accept UK backtracking on Brexit deal
  4. Puigdemont to return to Catalonia if elected
  5. Commission approves EasyJet partial takeover of Air Berlin
  6. EU medical command centre due next year
  7. Auditors: EU 'green' farm payments fail ecology criteria
  8. Austria gas explosion creates Italian energy 'emergency'

Stakeholders' Highlights

  1. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  2. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  3. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  4. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  5. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  6. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  7. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  8. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  9. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties
  10. EPSUEU Blacklist of Tax Havens Is a Sham
  11. EU2017EERole of Culture in Building Cohesive Societies in Europe
  12. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage

Latest News

  1. Last chance for Poland to return property to its rightful owners
  2. Commission attacks Tusk on 'anti-European' migrant plan
  3. Volkswagen tells EU: we will fail on our recall promise
  4. EU will not start Brexit future talks before March
  5. Bitcoin risky but 'limited phenomenon', says EU
  6. Panama Papers - start of sensible revolution in EU tax affairs?
  7. Lebanon crisis overshadows EU aid for Syrian refugees
  8. New Polish PM brings same old government