The blight of worldwide economic crisis has prompted European Parliament to vote in favor of capping EU banker bonuses, 625-28. In addition, extensive pension payouts were affected by the Parliament decision. Any form of short-term cash bonuses of this nature will fall under Parliamentary sway. Now it is time for the rest of the world to follow suit.
EU banking decision will put hold on advance cash bonus dollars
From 2011 onward, EU banker bonuses will be limited to up to 30 percent of the annual bonus via advance loan cash. The remaining 70 percent could be held in reserve and paid to the banker if the company performs well. This may create sufficient incentive to lead European bankers away from the path of short-term personal gain rather than long-term customer satisfaction. As Michel Barnier of the EU Financial Services Commission told the AP, “There will be no return to business as usual”.
Huge EU banker bonuses will be limited to 20 percent for early withdrawal
For big banks where executives get bigger bonuses, they can have only 20 percent of their bonuses until company performance is taken into account. What constitutes a “large” bonus was not specified by Parliament, though. The entirety of the European Union – comprised of 27 member countries – can be bound by the ruling on EU banker bonuses. For nations like Great Britain, France and Germany, however, the rules will not seem out of place – they’ve had banker bonus caps for some time.
Banks must hold a minimum capital amount
European Union banking establishments will also be required to maintain a enough level of capital on hand to insure against risky investment products. As outlined by the AP, the specific capital level for European banks would be approximately 3 to four times the previous (pre-recession) level. However, banks bound by the new rules are concerned that they’ll end up having to set aside even more emergency cash and will lose out when it comes to profit. Try convincing the public to cry for the banks and see what happens.
Discover more about this topic here:
USA Today
usatoday.com/money/world/2010-07-07-eu-bank-bonuses_N.htm
