Luxembourg, 21/06/2013 (Agence Europe) - On Thursday 20 June, the Council of the European Union endorsed the CRD4 package that increases bank capital requirements from 1 January 2014 and sets a cap on bank bonuses and variable pay. Only the United Kingdom rejected the package, which transposes into EU rules the Basel Committee's international Basel III agreement. It has not taken Europe as long to introduce the new rules, which in theory should have come into force on 1 January 2013, as the United States, where the process is still ongoing. Earlier this month, the governor of the Fed, Sarah Bloom Raskin, urged the US government to take the final steps to introduce the new capital requirements into US legislation.
In the EU, banks will have until 2019 to increase their high quality capital from 2% to 4.5%. Member states will be allowed to set additional capital requirements of up to 8% of total assets. Banks will be required to be capable of covering their liquidity needs for 30 days in the event of a crisis, and to be open about the profits they make and taxes they pay in each country where they do business.
The European Parliament adopted the package in first reading in February and has managed to get a cap on bonuses introduced. Bonuses should not exceed fixed pay (a 1: 1 ratio), but as long as the majority of shareholders agree, this can be raised to 1: 2 if 25% of the bonus comprises share options that cannot be converted into capital for at least five years. (EL/transl.fl)