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Bankers to see their bonuses capped

Finance Minister Michael Noonan called the European decision a ‘hard won breakthrough’.

Image: Man counting bonus via Shutterstock

THE EUROPEAN PARLIAMENT agreed last night to implement caps on bankers’ bonuses.

The provisional deal hopes to ensure pay practices at Europe’s banks do not lead to excessive risk-taking.

“This overhaul of EU banking rules will make sure that banks in the future have enough capital, both in terms of quality and quantity, to withstand shocks,” said Michael Noonan after the agreement was brokered as part of the Irish Presidency.

The agreement includes:

  • Rules for the amount of capital that banks need to hold – as well as the quality of those funds;
  • A new liquidity coverage ratio;
  • A leverage ratio to limit an excessive build-up of leverage on banks’ balance sheets;
  • New, enhanced governance arrangements, aimed at improving risk management;
  • Capital buffers on top of the minimum capital requirements;
  • Limits on the size of bankers’ bonuses.

The new rules will apply to the 8,000 banks currently operating within the EU, as well as other financial institutions.

“This will ensure that taxpayers across Europe are protected into the future. I believe that the compromise package that we have reached tonight is well-balanced,” continued Noonan in a statement.

Completing banking union is an Irish Presidency priority. As Presidency we are working to reach agreement with the European Parliament on the setting up of a single European banking supervisor. We are also working on getting member state agreement on bank resolution and recovery and well as deposit guarantee schemes, important elements in completing banking union.

He will present the proposals to EU Finance Ministers in Brussels next Tuesday. They have to be approved by EU Member States before the deal is finalised. There is also further work to complete the details of the legislation.

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