Wednesday

19th Feb 2020

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.

The new rules, set to be introduced next year, would limit bankers' bonuses to the equivalent of their salary, or two times their salary so long as shareholders agree.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or join as a group

Although EU finance ministers in Brussels on Tuesday (5 March) agreed to defer some technical points for further negotiation, ministers and the European Commission insisted that the substance of the deal could not be unpicked.

Internal Market Commissioner Michel Barnier said he was "crystal clear" that the bonus cap was a done deal and could not be re-opened. The era where bankers "could be paid more if they took more risks" was "finished", he stated.

Irish finance minister Michael Noonan, who chaired the talks, told reporters after the meeting that there had been a "divergence of opinion on bonuses." But he commented that the "space for further negotiation is quite narrow".

The bonus deal comes are part of legislation - also agreed Tuesday - putting in place rules on capital requirements and liquidity aimed at making the banking sector more robust to cope with future crises.

The EU's 8,000 banks would be required to hold at last 8 percent of top rated capital on their balance sheets, with so-called "too big to fail" institutions required to hold an additional 3.5 percent of capital.

Speaking earlier on Tuesday, Osborne said the bonus agreement "will push salaries up, it will make it more difficult to claw back bankers' bonuses when things go wrong, it will make it more difficult to ensure that the banks and the bankers pay when there are mistakes, rather than the taxpayer."

A UK official told this website that talks on pay would continue, stressing that London wanted to shift remuneration towards long-term performance, insisting that "no country has tougher rules than the UK on bank pay."

The principle of deferred bonuses was put into EU law as part of the previous directive on capital requirements.

McCarthy, the assembly's expert on bank pay, told EUobserver that the UK government had "wasted 18 months by failing to bring any alternative deal to the table until the last minute", adding the UK now had "no allies and no arguments."

Under the current agreement, 25 percent of the total bonus payment could be composed of a five-year bond or security. In an attempt to incentivise deferral, the bond would then benefit from a "discount" when calculating the total bonus payment.

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.

MEPs confirm bank bonus cap

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

News in Brief

  1. EU unveils white paper on AI and data strategy
  2. Dutch court rules against Russia in €46bn Yukos case
  3. Britain to bar 'Polish plumber-type' migrants
  4. Greece seeks EU help to get back classical statues from UK
  5. HSBC to cut 35,000 jobs worldwide
  6. Regions chief appeals against cutting EU cohesion funds
  7. Verhofstadt criticises UK Brexit negotiator
  8. Turkish court acquits Gezi park activists

Column

Western 'endarkenment' and the voodoo politics of Europe

The continent that gave the world the Enlightenment has collectively reverted to believing in fairy tales and the soothing power of cozy narrowness. Moscow and Beijing like what they see, and are doing everything to strengthen the trend.

Stakeholders' Highlights

  1. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  2. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  3. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  4. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  5. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  6. Nordic Council of MinistersNordic Climate Action Weeks in December

Latest News

  1. EU leaders face major clash on rule of law budget link
  2. North Macedonia warns EU on 'dirtiest ever' election
  3. Western 'endarkenment' and the voodoo politics of Europe
  4. Warning of agricultural 'digital arms race' in EU
  5. Cayman Islands put on tax-haven blacklist after Brexit
  6. Boris' Brexit bluff? - UK will resist alignment to the end
  7. US still open to Kosovo-Serbia land swap
  8. EU countries enter final phase of budget talks

Join EUobserver

Support quality EU news

Join us