European finance ministers will debate the new Capital Requirements Directive, which includes a cap on bankers’ bonuses, at a meeting in Brussels on Tuesday, as British prime minister David Cameron warned the new rules could affect the City of London’s competitiveness.
Mr Cameron was responding to a new European Union agreement on banking regulation that includes a provision to cap bank bonuses at two times salary in certain circumstances.
Irish officials brokered the deal early yesterday morning. It sets new rules on banking designed to protect European Union banks from future economic and financial shocks.
Under the new rules, employees of European banks will be subject to a bonus limit of two times their fixed salary, subject to shareholder approval. The new rules will be applied to all bank employees based in the EU as well as staff of European banks based abroad.
Strict transparency rules, including a proposal to oblige banks to disclose a breakdown of their revenue and profits by jurisdiction, were also introduced.
The proposal includes a commitment to review the new rules, to take account of their impact on competitiveness.
Despite calls from Britain for concessions on bonuses, the majority of member states were in favour of introducing new rules on pay as a way of curbing a culture of excessive risk-taking.
Finance ministers to meet
While the proposals have been discussed between member states at ambassadorial level, next Tuesday will be the first time they will go to finance ministers for approval. Despite British concerns, the proposals can be adopted through qualified majority voting, leaving Britain little room for manoeuvre.
The new rules contain widespread measures to bolster the banking system, including new capital requirements as outlined in the Basel III international rules on banking. The introduction of the directive, which has faced delays, will see the new rules come into force on January 1st, 2014.
Minister for Finance Michael Noonan welcomed the deal, saying it will ensure that taxpayers across Europe are protected.
