EU regulators hammer out rules on bankers' bonuses
Thursday 07 October 2010
Financial regulators from across Europe will today agree new rules governing bankers' bonuses, after two days of meetings behind closed doors.
The talks, held at the offices of the Committee of European Banking Supervisors (CEBS) in the City of London, bring together regulators from the 27 countries of the European Union.
A series of topics and documents will be discussed, according to a spokeswoman for the CEBS, the umbrella body for banking regulation in the EU, including draft guidelines on remuneration policies and practices.
She added it was premature to discuss the contents of the document "as it was subject to the plenary's approval". The outcome of the discussions will be published either later this week or at the beginning of next week. The spokeswoman would not elaborate further on other topics at the meeting, saying, "the agenda is not made public".
The most interesting part for bankers will be the discussion of how much of their remuneration packages will be paid in cash.
The Financial Services Authority (FSA) is representing the UK at the meeting, which comes less than three months after the UK watchdog published remuneration proposals of its own. The regulator's draft document called for at least 40 per cent of a bonus to be deferred for at least three years for all staff. It went further for bonuses over £500,000, saying at least 60 per cent must be deferred.
The FSA wants 50 per cent of any remuneration package to be in shares "or other equivalent non-cash instruments" of the firm, adding these shares would be subject to a minimum retention policy. The document also looked to crack down on the controversial issue of guaranteed bonuses, saying that any such guarantee could only be made in exceptional circumstances and only then for a year.
The FSA will close its consultation on the document tomorrow, and look to release a policy statement next month, which will come into effect from the start of next year. These rules will also be subject to the guidelines agreed at the CEBS meeting.
The CEBS advises the European Commission on policy and regulation on banking supervision. It has also looked to harmonise the rules across the European Union by developing guidelines and recommendations to banks and national regulators.
The CEBS was responsible for stress testing Europe's banks earlier this year. It also made sure the region's financial companies complied with the Capital Requirements Directive, based on Basel II, which demanded banks had enough capital on their balance sheets to protect against financial collapse.
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