eu moves to close bank bonus loophole
Last Updated : GMT 12:11:47
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EU moves to close bank bonus loophole

Arab Today, arab today

Arab Today, arab today EU moves to close bank bonus loophole

Brussels - AFP

The European Commission stepped up efforts Tuesday to prevent banks getting around EU limits on bonuses, by introducing new standards to identify traders and investment professionals who can make or break a lender. Such staff, dubbed "material risk takers", must comply with EU rules which limit banker bonuses, the extra payments blamed for encouraging the reckless risk-taking which sparked the 2008 global financial crash and then the debt crisis The rules, effective from January, state that a bank can pay a bonus of up to one year's salary and, in exceptional circumstances, twice that amount, but only with shareholder approval. To get around this limit, some banks have begun paying extra allowances to top staff, booking them as overall salary rather than bonus payments. "Some banks are doing their utmost to circumvent the remuneration rules," EU Internal Markets Commissioner Michel Barnier said in a statement. "The adoption of these technical standards is an important step towards ensuring that the ... rules on remuneration are applied consistently across the EU," Barnier said. "These standards will provide clarity on who new EU rules on bonuses actually apply to, which is key to preventing circumvention," he said. "The Commission will remain vigilant to ensure that new rules are applied in full," he added. The Regulatory Technical Standards (RTS) system will identify staff whose professional activities have a material impact on an institution's risk profile in a consistent way across the EU, the statement said. Among the criteria listed, such risk takers would be those with a total annual salary of 500,000 euros or in the top 0.3 percent of staff by pay in a single institution. The RTS allows banks to challenge the risk taker designation but this has to be then cleared with the European Banking Authority based in London. Britain, home to one of the world's largest financial markets in London, has gone to the European Court of Justice seeking to get the bonus limit rules scrapped. British Finance Minister George Osborne has warned repeatedly that the cap on bonuses is impractical and counter-productive. The RTS system now goes to the European Parliament and EU leaders for review for up to three months, after which it comes into force.

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