MEPs stand firm on bank bonuses

MEPs say they will fight proposals from EU Financial Services Commissioner Michel Barnier that would water down legislation capping banker bonuses.

European Parliament members have until the end of the week to respond to Barnier’s compromises, which would weaken a ban they approved in May on bonuses larger than bankers’ fixed pay, said Sharon Bowles, chairwoman of the assembly’s economic and monetary affairs committee.

“I’m not expecting there has been a big change of views” on the need for the curbs, she said. Philippe Lamberts, the MEP leading the work on the measures for the parliament’s Green group, said on Monday that he would be “amazed” if the assembly backed down.

Bankers are facing a backlash from EU politicians determined to cut variable pay as part of a quest to reshape lenders as utilities rather than money-making machines. The regulatory push comes as public outrage and shareholder rebellions this year forced some banks, including Citigroup and Barclays, to retreat from their initial pay plans.

The cap, part of draft legislation implementing capital levels called for by the Basel Committee for Banking Supervision, has become a sticking point in the assembly’s negotiations with national governments ahead of global regulators’ deadline of Jan. 1, 2013, to implement the rules.

Stefaan De Rynck, a spokesman for Barnier, the EU’s financial services chief, declined to immediately comment. European Commission officials are scheduled to meet with lawmakers to discuss the proposals on Sept 5.

Lawmakers are still likely to give ground on the bonus curbs in the final version of the Basel law, Richard Reid, research director for the London-based International Centre for Financial Regulation, said in an email.

Experience with other regulation shows that imposing “a single or simple solution to very complex and varied situations is very difficult and of course may ultimately prove almost impossible to enforce,” Reid said.

“This problem will have to be recognised with regards to bankers’ bonuses,” Reid said. “Some kind of compromise will have to be found.”

As an alternative to Parliament’s plan for a bonus cap, Barnier has said bank shareholders should be handed more power over compensation.

“My preferred approach is to place greater responsibility in the hands of shareholders, who would have to vote — it would be obligatory — on the ratio between fixed and variable pay,” Barnier said in June. “I would hope that we can find a compromise on that basis.”

— Bloomberg


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