Brussels, 21/03/2013 (Agence Europe) - On Wednesday evening, the Irish Presidency of the Council of the EU and the European Parliament reached final agreement on the CRD IV package of legislation transposing into the European Union the Basel III prudential bank rules (see EUROPE 10790). The EU rules set an upper limit on variable pay for bankers from 1 January 2014 onwards with bonuses limited at no more than the fixed salary (1: 1 ratio), with exceptions allowed if the majority of shareholders agree, in which case a 2: 1 ratio will be possible. The rules apply to all banks in the EU27, their subsidiaries outside the EU and non-EU banks with branches in the Europe.
Wednesday evening's agreement is largely the same as the broad agreement reached on 27 February (see EUROPE 10796) that was endorsed by the Ecofin Council on 5 March (see EUROPE 10799). Technical details have changed, however, and the bonus rules will not affect bonuses paid for 2013, explains the European Commission. It is difficult to know whether the United Kingdom will abstain or oppose the deal at the ambassadors' meeting (Coreeper) on Wednesday because the European Parliament has refused to go along with the UK's wishes. London fears that the measures on the table will send salaries up, explained British Finance Minister George Osborne at the recent Ecofin meeting.
“The European Parliament has resisted pressure from the British government and has not accepted more changes to caps on bonuses. Despite fierce resistance from national capitals and the financial industry, Europe will be fairer in 2014”, commented Udo Bullman (S&D, Germany), shadow EP rapporteur.
EU Internal Market Commissioner Michel Barnier said: “After the agreement on the Single Supervisory Mechanism two days ago (see EUROPE 10810), we are taking another fundamental step towards a genuine Banking Union, which will contribute to securing the stability of European banks and benefit our economies at large”. As planned, the deal will bring the rules into force before the eurozone bank supervision mechanism gets up and running in Spring 2014.
Barnier went on: “The new framework will make EU banks more solid and will strengthen their capacity to manage properly the risks linked to their activities, and absorb any losses they may incur in doing business. Second, we are now in a position to enact a key G20 commitment, as CRD IV transposes into EU law the Basel III agreement. With last night's package, the EU translates international standards on bank capital agreed at global level, thereby fully implementing the decisions taken by the G20. This agreement testifies that the EU is in the frontline in promoting a coherent application of Basel III rules to create a level playing field for banks and avoid the instability that would stem from diverging rules in the world's two largest financial markets. We expect other G20 members to also live up to their commitments”.
Alongside agreement on bank bonuses, the new rules require banks to increase their total top quality capital requirements from 2% to 4.5%; capital requirements can rise to 8% of assets if member states require it; banks must keep a float of cash to cover all their outgoings for 30 days (a short-term liquidity ratio will come fully into force in 2017); transparency rules will require banks to give a country-by-country breakdown of their profits and taxes. The rules will now be submitted to the European Parliament for a vote at the April plenary, when the EP will also be giving its view on a draft law adopted by the European Parliament's Economic and Monetary Affairs Committee on Thursday 21 March on the pay and bonuses of investment fund managers. (EL/transl.fl)