Monday

25th Jun 2018

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... our join as a group

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.

MEP calls for end to massive bank bonuses

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.

MEPs drop the axe on bank bonuses

The European Parliament has approved measures to curb bank bonuses, part of a wider series of EU reforms intended to prevent a repeat of the recent financial crisis that has decimated the region's economy.

Greece and creditors proclaim 'end of crisis'

After late-night talks, the Eurogroup agreed on a €15bn disbursement and debt relief measures for Greece, while setting out a tight monitoring when the bailout ends in August.

Greece and creditors proclaim 'end of crisis'

After late-night talks, the Eurogroup agreed on a €15bn disbursement and debt relief measures for Greece, while setting out a tight monitoring when the bailout ends in August.

News in Brief

  1. EP civil liberties committee votes for Article 7 on Hungary
  2. Report blames 2017 egg scare on lax EU enforcement
  3. Nine countries to sign up for Macron's military initiative
  4. Re-elected Erdogan potentially in power until 2028
  5. Macron's popularity drops among French pensioners
  6. Tajani calls for €6bn investment to halt migration
  7. Major demo in London for second EU referendum
  8. Venice Commission: Hungary should repeal NGO law

Stakeholders' Highlights

  1. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  2. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  3. Macedonian Human Rights MovementMHRMI Launches Lawsuits Against Individuals and Countries Involved in Changing Macedonia's Name
  4. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  5. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  6. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  7. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  8. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  9. Mission of China to the EUChina: Work Together for a Better Globalisation
  10. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  11. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  12. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform

Latest News

  1. Rutte - from 'Mr No' to 'next Tusk'?
  2. UN offers to help EU's migrant 'disembarkation' plan
  3. Progressive CAP alternative only hope for sustainability
  4. Ponytailed green MEP joins 'the other side of the table'
  5. EU leaders still in search of migration plan
  6. Migration row at centre of EU summit This Week
  7. Merkel's woes cast shadow on EU's future
  8. Europe's tech race - trying to keep pace with US and China

Join EUobserver

Support quality EU news

Join us