Bonus Curbs Endorsed by EU Lawmakers in Vote on Basel Rules (Update 3)

The Basel 3 draft law is a law to be implemented by January 2013 throughout the EU states which more than triples the amount of core capital a bank needs to hold to 7 percent of their risk-weighted assets. An addition to the draft law only yesterday is that;

Lenders should also be forbidden from giving staff bonus awards that exceed fixed salaries, in the proposals approved by members of the European Parliament’s economic and monetary affairs committee in Brussels yesterday. The amendments will be part of the EU assembly’s negotiation position in talks with governments on the legislation

While the position of the financial institutions are very much against the notion.

Limiting the proportion of bonuses in compensation “intrudes on the important role of shareholders to determine key questions on pay and commercial strategy,” Simon Lewis, chief executive of the Association for Financial Markets in Europe, said in an e-mailed statement. “It could also introduce additional fragility to the European banking system by increasing banks’ fixed costs.”

I personally do not see the point that this proposal would somehow weaken the banks to have their pay fixed, I would doubt they save any money doling out bonuses as excessively as they have been in recent years. While I agree that in a bad year a bank does pay out a little less ( JPMorgan Chase & Co. revealed earlier this month that it set aside 36 percent less than the year before to pay its investment bankers) I do not see how setting a higher salary and paying less in bonuses would be detrimental in any way to bankers.

This is something I hope they can keep as part of the laws in as many countries as possible.



Full article here: www.bloomberg.com...