EU cap on bankers’ pay could threaten City workers
Members of the European Parliament have agreed on restricting bankers’ bonuses at the European Council meeting in Brussels, on Wednesday 28th February.
They agreed that “bankers’ annual bonuses must not normally exceed their annual salaries”, except for bonuses “of up to twice annual salary” when authorised by shareholders.
There are currently 154 Banks incorporated in the UK, according to a January 2013 Financial Services Authority (FSA) list, and even more operating within Britain.
In June 2010, British economist Sir John Vickers was appointed by Chancellor of the Exchequer, George Osborne, as the Chair of the Independent Commission on Banking.
The commission aimed to recommend banking policies on “reducing systemic risk” and “mitigating moral hazard” while “promoting competition in both retail and investment banking”.
Prime Minister David Cameron said: “We do have in the UK – and not every other European country has this – we have major international banks that are based in the UK but have branches and activities all over the world, and we need to make sure that regulation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding while being located in the UK.”
The EU also wants to raise the capital threshold needed for banks to 8% quality capital for more transparency. Banks would have to publicly disclose profits, taxes, turnover, subsidies and their number of employees by 2015.
Austrian EU Parliament member and politician, Othmar Karas, said: “We have achieved the most comprehensive bank regulation package in the EU. Banks will be stabilised and more resistant to crises.”
Irish Politician and Finance Minister, Michael Noonan, told Bloomberg television: “We think there is a median where a settlement can be reached without upsetting the cost base in the City of London or without depriving people of rightfully earned bonuses.”
The European Central Bank said on the 24 January 2013 in a Bank Structural Reform document that: “The financial crisis has clearly highlighted that the governance and control mechanisms of banks failed to rein in excessive risk taking. Hence, the Euro system highly welcomes the proposals on strengthened governance of banks.”
The plans have to be agreed by the European Parliament by a vote on the 15th-18th of April and the rules then have to be made national law by January 2014.
Lucy Woods
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