Brussels, 12/02/2013 (Agence Europe) - The EU Council of Ministers and European Parliament say that a definitive political agreement on the draft CRDIV legislation on bank capital requirements is within reach and may be reached at the upcoming thee-way institutional talks on Tuesday 19 February. Several outstanding issues remain, including that of bank bonuses.
A final compromise is within sight, said Irish Finance Minister Michael Noonan on Tuesday 12 February. European Parliament rapporteur Othmar Karas (EPP, Austria) says the talks between ministers and the EP have entered the decisive phase and can probably be concluded at the talks on Tuesday 19 February, if the ministers endorse the compromise currently on the table. He regretted the way the rotating six-monthly chairing of the EU had delayed matters.
On Thursday 14 February, the Irish Presidency of the Council of Ministers will unveil to member states' ambassadors (COREPER) a draft compromise covering the main outstanding issues, namely bank bonuses and the flexibility the member states have in setting additional capital requirements of their own. Noonan said the proposal would cover all the usual elements.
The EP is sticking to its guns over including measures on bank bonuses. It says variable pay must not be allowed to exceed fixed pay (a ratio of 1 to 1), but has hinted that it is willing to accept bonuses of double fixed pay (ratio of 2/1) as long as the AGM of shareholders agrees. The EP is very keen that a cap of some sort be set. It is reported that agreement was reached on this approach in December with the Cypriot Presidency, but the member states said the presidency did not have the negotiating mandate to agree such a thing. The EP says that the Irish Presidency has never asked for this area to be renegotiated.
On Tuesday, EU Internal Market Commissioner Michel Barnier said that the Council of Ministers and EP were still “quite” far apart.
Despite opposition from member states (led by the United Kingdom), the Irish Presidency is aware of the need to find a compromise solution that moves in the direction of the MEPs and is reported to be planning to introduce the 1/1 ratio unless a bank's shareholders at its AGM decide to increase it to 2/1 or even 3/1. In exceptional circumstances, the Irish Presidency would consider bonuses being four or five times fixed pay for a top banker, revealed a diplomat, adding that many member states are keen to avoid isolating the UK on this symbolic matter.
A compromise close to the EP's line would enable the Council of Ministers to have its way in terms of flexibility for the member states to set additional capital requirements. Anxious to protect the “integrity of the Single Market”, Barnier says the Commission has reservations about this. When national supervisory bodies want to apply additional capital requirements to banks operating in their country, they would have to discuss it in advance with their counterparts in order to avoid negative fallout on other member states.
The legislation will introduce a liquidity ratio for banks to ensure it can continue to operate for a month in the event of a run on the bank. The EP and Council of Ministers have agreed to incorporate the Basel Committee agreement unveiled last month (see EUROPE 10758). One of the last items remaining to be settled is timing. The EP wants the short-term liquidity ratio to be applied in full in 2018, but the ministers want to stick to the Basel Committee's 2019. The decision-making process also needs to be decided upon - a delegated act, says the EP, but the Council of Ministers wants co-decision - for deciding on a short-term liquidity ratio at EU level.
Karas said that 1 January 2014 is plausible for the new rules to come into force, as long as agreement in principle is reached without delay. (MB/transl.fl)