The blight of worldwide economic crisis has prompted European Parliament to vote in favor of capping EU banker bonuses, 625-28. In addition, extensive pension payouts were affected by the Parliament decision. Any form of short-term cash bonuses of this nature will fall under Parliamentary sway. It’s a move the European Union hopes the rest of the world will follow in kind.
Bonus advances could be closely monitored by EU
Early withdrawal of EU banker bonuses will cap at 30 percent of the annual potential bonus. The remaining 70 percent can be held in reserve and paid to the banker if the business performs well. The operative notion is that withholding many of the bonus will prod EU banker bonuses depending on performance, rather than a gentrified system. “There will be no return to business as usual,” EU financial services commissioner Michel Barnier told the AP.
For extra-large bonuses, advance withdrawal is limited to 20 percent
For big banks where executives get bigger bonuses, they can have only 20 percent of their bonuses until company performance is taken into account. European Parliament has neglected to numerate what constitutes a “large” bonus so far. The new cap on payday cash bonuses for European bankers effectively creates rules for all 27 member countries of the European Union for how to deal with EU banker bonuses. Great Britain, France and Germany won’t seem much difference, as they’ve had banker bonus caps in effect for a while.
Banks must hold a minimum capital amount
As part of the new rule, European banks beginning in 2012 can have to keep at least a minimum level of operating capital on hand to cover risky ventures like mortgage-backed securities. According to the AP, the specific capital level for European banks would be approximately three to four times the previous (pre-recession) level. However, banks bound by the new rules are concerned that they’ll end up having to set aside even more emergency cash and will lose out when it comes to profit. The likely public reaction would be the banks brought this on themselves, and it is time to pay.
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USA Today
usatoday.com/money/world/2010-07-07-eu-bank-bonuses_N.htm
