Many criticise plush bonuses as a culture that caused the 2008 crash
Brussels – Arabstoday
The European Union has reached a deal to cap bankers' bonuses, which critics say played a major role in driving the financial crisis, officials said on Thursday.
The deal was struck early on Thursday, with the European Parliament
and the EU's current Irish presidency agreeing on how to implement new rules for the banking sector.
"For the first time in the history of EU financial market regulation, we will cap bankers' bonuses," said MEP Othmar Karas, the negotiator for the parliament.
The new regulatory framework is known as Basel III, an internationally-agreed set of rules which tighten up bank capital requirements.
The negotiations on Basel III implementation in the EU have dragged on for some 10 months, in part because of the European Parliament's desire to peg back banker bonuses which critics blame for helping drive the speculative approach in the lead-up to the 2008 global financial crisis.
Basel III was supposed to have been implemented from January this year but the timetable has slipped, with the United States announcing in November that it too would not make the deadline.
The accord reached overnight will now go forward to EU finance ministers when they meet next week in Brussels.
Kras said the provisions on banker bonuses were "not the most important part of the new rules," the key point being the new capital regulations for the banks.
"The essence is that from 2014, European banks will have to set aside more money to be more stable and concentrate on their core business, namely financing the real economy, that of small and medium-sized enterprises and jobs."
Basel III notably requires the banks to build up their capital buffers and reserves so that they will be better able to withstand any new crisis.
Full details of the EU accord will be released at a press conference in the European Parliament later on Thursday.
British Prime Minister David Cameron said Thursday he would "look carefully" at the proposed new regulations while defending the UK's position as an international financial centre.
Speaking in Riga after talks with Latvian Prime Minister Valdis Dombrovskis, Cameron told journalists: "On the negotiations in Brussels on banking regulation...we will look carefully at the outcome of the negotiations last night.”
"We are absolutely clear that we must be able to implement the Vickers Plan in the UK which in some ways is tougher than regulations which have been put in place in other European countries. We want to have a proper ring fence between retail banks and investment banks and the rules must allow that to happen."
The Vickers plan is a set of domestic proposals designed to reform the UK banking sector.
Cameron signalled that he would not allow new regulations from Brussels to impact the leading role of the City of London in global marketplaces.