Review of bank rescue plans to look at bonuses - Almunia

JOAQUIN ALMUNIA, the European Commission’s nominee for competition commissioner, said that regulators will look at bonuses when reviewing government rescue plans for banks.

“We’ll look very carefully at what kind of use is made of the public money,” Mr Almunia said at a European Parliament confirmation hearing in Brussels yesterday.

“We won’t accept that with public money of banks that were rescued or supported during this period that the expenditure side will show increases in the bonuses or the amounts targeted to the financing of these bonuses or remuneration schemes.”

The commission reviewed the restructuring plans of dozens of banks, including Royal Bank of Scotland and Lloyds Banking Group, bailed out during the financial crisis to ensure they did not have an unfair competitive advantage.

EU governments have pumped almost €200 billion into banks since the crisis began in 2007.

Mr Almunia (61), the current European economic and monetary affairs commissioner, said that the EU should prepare a strategy to withdraw state aid to companies.

The proposals must take into account economic conditions, he said.

Mr Almunia will take over the role from Neelie Kroes (68), who gained a reputation for pursuing large industries and companies including Microsoft for alleged antitrust violations.

Ms Kroes was nominated by European Commission president Jose-Manuel Barroso to serve as telecommunications commissioner. Mr Almunia did not indicate any change in the EU’s policy of raising fines against companies for abusing dominant market positions or fixing prices.

He said that the levels of fines in 2006 were “appropriate”.

For cartels, the EU levied a record amount of penalties of €3.3 billion in 2007, almost double the €1.8 billion in 2006.

“We need to keep them at an appropriate level,” he said. “If they are too low, companies won’t be dissuaded from acting in a noncompetitive way.”

Mr Almunia also said that a financial transaction tax, also known as a Tobin tax, was a “very good idea”. “I know it’s a very difficult tax to be implemented,” said Mr Almunia. – (Bloomberg)