EU to Consider Caps on Banker Bonuses

Substantial progress on limiting the pay of bankers has not been made despite the fallout from the financial meltdown of 2008-2009. Despite the crisis and a wave of subsequent financial misdeeds, from LIBOR rigging to massive losses in risky trades, opposition from banks has alleged that such limits would cost them their most talented staff.

The proposal to be discussed Monday would apply an automatic cap of three times salary to bonuses, although an official was quoted saying, “Shareholders could decide to go for five times.” Another official said in the report, “There should be a final push so that there is a political agreement at the meeting of finance ministers on December 4.” He added that changes to any cap were still possible.

While present EU rules already compel banks to defer up to half the bonus for at least three years, and the EU’s restrictions on bank pay are already tighter than the guidelines from the G20, some countries, such as Germany, want to tighten them still more. The European Parliament is in favor of restricting all the elements of a bonus to total no more than a banker’s basic salary.