European regulators release details on bank bonus levels

10th December 2010, Comments 0 comments

European banking regulators on Friday released the definitive version of rules setting strict limits on European banker bonuses.

The Committee of European Banking Supervisors (CEBS), which groups regulators from the 27 EU members, had been directed to draft guidelines on implementing bonus restrictions on traders and bank executives adopted in July by the European Parliament.

The bonuses are seen as having encouraged imprudent, high-risk trading activities that contributed the 2008-2009 financial crisis.

The new rules, to take effect in January, stipulate that bonuses must be "proportional" to an employee's fixed salary, spread out over three years, with the cash component limited to 50 percent of the total bonus and 30 percent of the initial installment.

The text published Friday largely embodied proposals made by the CEBS in October, which sparked criticism from the European banking sector.

Banking leaders charged that the committee had applied too strict an interpretation to the measures adopted by the parliament.

The CEBS is insisting that the rules take effect on January 1 and that banks should generally apply them from that date. Critics had pressed for a transition period.

The regulations will in addition apply to all subsidiaries of European banks, including those operating outside Europe. The committee however said it had added "clarifications" to respond to criticism of the text.

© 2010 AFP

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