admincomfortably, but in doing so, trigger fresh disquiet in the banking centre of the City of London and a probable sea-change in pay practices in Europe.
The vote was called on an agreement struck late March between parliament negotiators and the European Union’s current rotating chair, the government of Ireland, despite the controversy stirred earlier in Britain.
The deal was to cap bonuses at the same amount as is paid in a fixed annual salary, or twice that sum if shareholders approve the payment by 66 percent of voting rights or 75 percent if no quorum is reached, according to the parliament.
British Finance Minister George Osborne had told his peers during a public debate that “we can’t support the proposal currently on the table”, but extra-time negotiations appeared to have yielded few concessions.
The legislation was originally required to translate into European law internationally agreed rules to beef up banks’ capital and make them better able to withstand future crises.
Parliament insisted, however, that the bonus cap be added to satisfy public anger over pay packages seen as exorbitant in a time of recession and massive job losses, the head of the legislature, Martin Schulz, hailing what he called a “revolutionary measure”.
The new regulations called Basel III primarily tighten up bank capital requirements. They were due to start to take effect this January, but next year now seems the most likely.
Hailed by French Finance Minister Pierre Moscovici at the time as a “moral crusade”, Osborne had argued that the move to hit bonuses would succeed only in pushing up salaries.
Home to some three quarters of the EU’s finance industry, London has long maintained that bonus and salary caps would make Europe’s banking sector uncompetitive.
The final negotiations centred on ways to steer permissible incentives more towards the long term, with extra safeguards enabling “clawbacks” if a banker’s performance falls short.
A quarter of bonus monies should be deferred for five years, with the London-based European Banking Authority tasked with working out adjustments to take account of inflation and other risks. — AFP.
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