EU bank rules will limit risky upfront cash bonuses - 2011-01-12

Banks' risk-taking bonus culture will be tackled by EU rules this year, despite the British government's climb-down on the issue.
 
That's the message from Labour MEPs as banks prepare to reveal their 2011 bonus packages.
 
In a statement to the House of Commons on Tuesday, Chancellor of the Exchequer George Osborne made it clear that, while ministers have been making strong statements about tackling the bonus culture over the last year, the government is not going to live up to the rhetoric.
 
However, despite the government's inaction, the coalition is required to implement EU rules that were passed last year that will limit the amount of a bonus that can be paid upfront in cash.
 
Bank employees in risk-taking roles will now see the vast majority of their bonus retained for several years, with its eventual payment dependent on long-term success.
 
In a letter to the Guardian this week, Labour's leader in the European Parliament Glenis Willmott MEP explained that, despite being in opposition in Westminster, it was Labour that is acting on this issue: "We can see that the government has little real appetite to tackle the City's risk-taking bonus culture. However, despite attempts by the government to water it down, new EU legislation is now in place to limit the upfront cash payments that have in the past rewarded bankers for short-term risky investments.
 
"These new rules, taken through the European parliament by Labour MEP Arlene McCarthy, aren't about bashing bankers. They are about putting long-term interests ahead of short-term risks. So while the government has talked tough but done little, it is Labour that has delivered constructive reforms."
 
Arlene McCarthy was the European Parliament's rapporteur on the legislation, meaning she was responsible for drafting the new rules and striking a final deal with governments across the EU. She said: "George Osborne's climb-down on bankers' bonuses comes as no surprise to those of us who have been watching the government's actions in Brussels.
 
"The coalition eventually signed up to the new rules in June but throughout the autumn, while making bold public statements about their intentions to be tough with the banks, they were lobbying to weaken the rules, looking for loopholes through which banks could pay far more of their bonuses in cash."

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