EU countries push for bank pay crackdown
All European Union finance officials but Britain widely backed France's call for an immediate end to bloated bonuses.Brussels – An EU drive to curb bankers' bonuses won guarded commitment from Britain on Wednesday, as ministers pushed for a crackdown on the pay practices partly blamed for the financial crisis.
European Union finance ministers widely backed French-led proposals seeking an immediate end to bloated bonuses, while Britain signed up only to "general principles," according to a source close to the British Treasury delegation.
Meanwhile a British official said Wednesday that the government would make its own proposals for reforms on bankers' pay at the meeting of G20 finance ministers starting in London on Friday.
Swedish Finance Minister Anders Borg, whose country currently chairs the European Union, said a "strong common European position" on bankers' pay was agreed in Brussels amid signs of "excessive risk-taking" returning to markets.
But he insisted: "There is a need for muscle and teeth, not only principles and guidelines."
The issue will now be picked up by the leaders of the world's biggest industrialised economies, led by the United States.
In London this weekend, a preparatory meeting of finance ministers from the Group of 20 leading economies will attempt to outline a common position to take to a G20 summit in Pittsburgh on 24-25 September.
Announcing Britain's own proposals, a British official quoted by Dow Jones Newswires said: "The UK is committed to ending the short-term bonus culture and pay practices that could threaten the stability of the financial system."
Those rules would include having bonuses paid over five years, with some of the money to be clawed back if the traders' long-term performance weakens.
Britain will also seek rules to ensure that banks cannot guarantee bonuses to their staff and that a "significant proportion" of bankers' remuneration comes in the form of non-cash payment such as stocks, the official said.
Britain is opposed however to French plans, widely supported in Brussels, to impose a mandatory cap on bankers' bonuses.
Borg admitted there is "a lot of work" still to be done, but said the EU had put "a lot of pressure on the other side of the Atlantic."
Asked how he expected to acquire regulatory bite, Borg said targeted action would have to be agreed by the G20 countries -- but said the EU was now "standing united" going to the summit.
French Finance Minister Christine Lagarde said progress on penalties had been reached.
The European commissioner for economic and monetary affairs, Joaquin Almunia, said new regulations must be introduced and that the EU attitude was that the financial sector could no longer consider it "business as usual".
He added: "We are committed not to forget the experience of this (economic) crisis."
The issue has become increasingly politicised since major banks in the United States, Britain and France ramped up provisions allowing for bonuses on emerging from the credit crunch.
"The bankers are acting like it's 1999 but it's actually 2009," Borg had boomed on his way in to Wednesday's meeting. "The bonus culture must come to an end and it must come to an end in Pittsburgh."
Many bank chiefs believe similar caps across the board would be ineffective.
London's conservative mayor Boris Johnson warned on Wednesday that bankers could easily wriggle out of new regulations.
"It is only too easy for banks and other firms to re-designate forms of remuneration that were previously bonuses as salary," he said, but added that banks had to offer a "sign of their duty to wider society".
Meanwhile, Borg also secured agreement to raise EU financing of the International Monetary Fund to EUR 125 billion (CHF 189 billion).
With more than 20 million people unemployed across the EU, "We will see social tension in our societies given that we are still in a very precarious position in terms of the labour market," he warned.
"In that kind of environment, it's very important that we... give a clear message that the old bonus structure must come to an end."
AFP / Expatica