European Parliament caps bankers' bonuses
One for my fellow bankers in Europe:
"New rules on capital requirements for banks and a cap on bonuses for bankers are the results of negotiations between Council and Parliament which were concluded with a deal late on Tuesday. The European Parliament is confident that the agreement delivers tough and effective rules that will cover all bonuses awarded or paid from 2011 onwards. It will be the first cap on how bankers are paid worldwide.
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"This new EU wide law will transform the bonus culture and end incentives for excessive risk taking. These incentives for chasing short term bonuses over the long term health of the financial system played a key role in the crisis. The new rules mean reward is linked to long term performance.
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Cash bonuses will be capped at 30% of the total bonus and to 20% for particularly large bonuses. In place of upfront cash between 40 and 60% of any bonus must be deferred and can be recovered if investments do not perform as expected. Moreover at least 50% of the total bonus would be paid as "contingent capital" (funds to be called upon first in case of bank difficulties).
Bonuses will also have to be capped to salary. Each bank will have to establish limits on bonuses related to salaries, on the basis of EU wide guidelines, to help bring down the overall, disproportionate, role played by bonuses in the financial sector.
Source: http://tiny.cc/s7kd8
Worth noting that the BBA claim the changes were already implemented in the UK last year:
http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=145&…
Thoughts?
Bb.
I think we will see a rise in base pay. It has already happened in some sense.
I'm not particularly opposed to bonuses not being paid in cash, but this "cap to salary" thing does not sound good.
Funny how the UK doesn't seems to care about this new law and whines about every other
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