The blight of worldwide economic crisis has prompted European Parliament to vote in favor of capping EU banker bonuses, 625-28. Excessive pension payouts will even fall under new guidelines. The Associated Press reports that any short-term cash bonuses from next year can be limited. Now it is time for the rest of the world to follow suit.
EU banking decision will put hold on advance cash bonus dollars
Early withdrawal of EU banker bonuses will cap at 30 percent of the annual potential bonus. Seventy percent can be withheld until it is certain that business performance warrants the remainder of the annual bonus for the banker. The idea behind this is to hold a sufficiently large carrot before EU bankers, where bonuses will inspire rather than simply be expected. Michel Barnier, the EU financial services commissioner, told the AP that “There will be no return to business as usual”.
Huge EU banker bonuses can be limited to 20 percent for early withdrawal
Early withdrawal from large-scale bonuses will be limited to 20 percent. What constitutes a “large” bonus was not specified by Parliament, though. All 27 European member countries will adopt the new cap on EU banker bonuses. Countries like Great Britain, France and Germany reportedly had effective banker bonus caps in place.
More operating capital will be the rule
European Union banking establishments will also be required to maintain a enough level of capital on hand to insure against risky investment products. Three to four times more capital can be required than normal, writes the AP. The worry on the part of the banks is that the open-endedness of this requirement may paint them into a corner and require that they hold onto so much that profits will plummet. The likely public response would be that the banks brought this on themselves, and it’s time to pay.
Discover more information here:
USA Today
usatoday.com/money/world/2010-07-07-eu-bank-bonuses_N.htm
