New rules on bankers’ bonuses and the amount of capital that banks must hold as a buffer have been approved by the European Parliament by a big majority.
The EU plans to cap bonuses at 100% of a banker’s annual salary, or 200% if shareholders approve. The aim is to curb the sort of high-risk lending that contributed to the financial crash in 2008.
To encourage bankers to take a long-term view, a minimum of 25 per cent of any bonus exceeding 100 per cent of salary must be deferred for at least five years.
The new rules (if approved by the Council of Ministers) will apply from 1 January 2014. For further information, please click here.
Whilst the aim is to ‘curb speculative risk taking, the banks will probably raise basic salaries to compensate investment bankers, so the new cap may be counter-productive.
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