Saturday

30th Jul 2016

Bank capital rules delayed after talks collapse

  • Taking aim at bank bonuses (Photo: Images_of_Money)

Last ditch attempts by the Cypriot presidency to push through EU legislation on bank capital levels and limits on bonus payments have collapsed, with MEPs and ministers still deadlocked after months of talks.

Irish officials, whose government will hold the rolling presidency from January, will now assume responsibility for brokering a deal.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Under the compromise proposed by the Cypriots, bonus payments would be capped at the same level as salaries, with bank shareholders able to waive this in favour of a 2:1 ratio only with a supermajority of at least two thirds of shareholders voting.

In exchange, MEPs would accept the EU governments' position on liquidity and leverage which would allow them to tailor national rules to the needs of domestic banks.

Negotiations between MEPs and ministers were set to continue on Tuesday (18 December). However, a handful of member states, including Germany and the UK, spiked the plan, with one official telling EUobserver that the Cypriot team had "strayed too far from their mandate".

The legislation, which is aimed at putting the Basel III rules drawn up by the Swiss-based Bank of International Settlements into EU law, deals with the minimum levels of core capital held by European banks.

Low levels of core capital and over-leveraging were among the main contributory factors in the 2008-2009 financial crisis, leaving many banks unable to absorb multi-billion-euro losses from sub-prime debt.

The delay means the EU will join the US in failing to meet the January 2013 implementation date laid out in the Basel III accord.

Speaking with MEPs on the economic affairs committee on Monday (17 December), Cypriot finance minister Vassos Shiarly refused to be drawn on the state of the negotiations, commenting only that "agreement is within reach."

The three main unresolved issues are believed to be bank bonuses, rules on liquidity and leverage, and supervision of the regime.

However, a national official involved in negotiations played down the prospect of a swift deal, commenting that there are "loads of gaps in the text" and disagreements among member states, as well as between ministers and the European commission.

Governments want to be responsible for setting national supervision regimes to take account of the demands of their banking sector.

The commission wants to give the London-based European Banking Authority the final say over implementation.

Although there is strong public support for cracking down on executive pay, some national regulators claim that the bonus cap could be counterproductive, leading banks to respond by increasing salaries.

The directive's predecessor - "CRD III," adopted in 2010 - did not include a fixed cap on bonus payments but requires the bulk of a bonus to be paid in shares or contingent capital, both of which can be recouped if a bank underperformed or faced financial difficulty.

The rules are seen as a vital component of the planned single rule-book for EU banks and a banking union.

EU free movement must be curbed, UK says

British leader Theresa May has said free movement of EU workers to Britain cannot continue as in the past, while visiting Slovakia and Poland on Thursday.

Stakeholders' Highlights

  1. Counter BalanceThe Trans Adriatic Pipeline: An Opportunity or a Scam in the Making for Albania?
  2. Dialogue PlatformFethullah Gulen: I Condemn All Threats to Turkey's Democracy
  3. GoogleHelping Emergency Services Find You When You Need It Most
  4. Counter BalanceWhat's New in the Investment Plan for Europe: Business as Usual or True Innovation ?
  5. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event 2016
  6. GoogleHow Google Fights Piracy: Creating Value While Fighting Piracy
  7. EJC"My Visit to Israel" - Opinion by MEP Lopez Aguilar, Chair of the EP Working Group on Antisemitism
  8. World VisionChildren Migrating, Out of School and at Work as Hunger Deepens in Southern Africa
  9. European Healthy Lifestyle AllianceStand-Up (and Exercise) to Prevent Chronic Diseases
  10. Centre Maurits CoppietersLaunches a Real-time News Hub Specialised in EU Stakeholders
  11. GoogleEU-US Privacy Shield: Restoring Faith in Data Flows and Transatlantic Relations
  12. World VisionWorld Leaders & Youth Advocates Launch Partnership to End Violence Vs. Children

Latest News

  1. Terrorism and migration top EU public's concern
  2. Spain's Rajoy warns of minority rule
  3. Car lobby complained about emissions tampering by others
  4. Critical IMF report heralds new Greek bailout battle
  5. EU free movement must be curbed, UK says
  6. EU political pressure alone cannot save the rule of law
  7. Merkel: Attacks won't change refugee policy
  8. EU-Turkey relations after the coup