Bankers' bonuses capped in EU banking reforms
Officials have brokered a deal to enshrine a new set of banking regulations into European law, including a controversial cap on bankers’ bonuses.
MEPs and national governments have brokered a deal to enshrine a new set of banking regulations into European law, including a controversial cap on bankers' bonuses that will see such payments limited to no more than twice the employee's annual salary, writes the Financial Times. The Basel III regulations, drafted by the Swiss-based Basel committee and agreed in the early hours of February 28, also increase the amount of capital that banks must hold and a leverage ratio mechanism to limit excessive borrowing on bank balance sheets.
The deal is "a bit late, arguably incomplete, punctuated with political sweeteners and painfully complex, even for those negotiating it," says the Financial Times, adding -
Yet when passed, this law will undoubtedly hold the EU banking system to a higher, more rigorous standard. [...] It is the bloc's most important single piece of post-2008 regulation, a tangible break with the freewheeling past and the foundation for a future banking union.
However, "few recent EU laws have generated as much strife - especially for Britain," he continues, pointing to the UK's staunch resistance to the pay cap.
Geneva-based daily Le Temps agrees, noting that "this agreement represents a failure for the British government which long pleaded against the pay cap in order to please the City, which employs nearly 700,000 people".
After reaching a peak of €13.30bn in 2008, the total of bonuses distributed in London has shrunk by more than half to €5bn, according to data from the Centre for Economics and Business Research. They are expected to decline to €1.7bn in 2013 and to shrink even further in coming years.
Le Temps puts the European Union's measure into perspective by noting that "it could have but a limited impact on the salaries of the financial sector, in London especially, where annual salaries sometimes reach €5.7m".
Read this article in Dutch.