MEPs approve tough new curbs on the City's bonus culture

Europe-wide curbs on bankers' pay were approved by the European Parliament yesterday as the City of London prepared a charm offensive in a bid to stave off further regulatory assaults. The new rules, which include capping the cash proportion of any payment at 30 per cent – 20 per cent for bigger payouts – will also apply to the likes of hedge fund managers and staff of other financial companies.

Arlene McCarthy, the MEP responsible for the deal with the European Commission that has seen the rules passed into law, said they would "transform the bonus culture and end incentives for excessive risk-taking".

She rounded on criticism of the rules from hedge funds and the City, saying: "They are designed to align payments with the interests of investors. I would have thought hedge funds would be keen on doing that, rather than finding ways round the rules and complaining."

While the Financial Services Authority's own crackdown on bonuses is arguably even tougher, it applies only to the 27 biggest banks operating in London. The scope of the European rules is much wider.

Ms McCarthy, who is vice president of the economic and monetary affairs committee, added: "Financial experts agree that a high-risk, short-term bonus culture, combined with a lack of capital, were at the heart of the global financial crisis in 2008. Governments and taxpayers bailed out the banks with €3.9 trillion of support. In Britain alone ne, the support was £1.2trn – almost as much as a whole year's GDP. Remuneration policies must first and foremost prioritise the health and stability of a financial institution."

British MEPs criticised the BNP and the UK Independence Party for opposing the rules. A Liberal Democrat MEP, Sharon Bowles, said: "Today we voted to ensure that there will be... a cap on cash bonuses and measures to make sure that top bankers take the hit rather than taxpayers. I'm gobsmacked that UKIP and the BNP don't see fit to support these measures and I wonder what their constituents would have to say on the matter."

The rules do not limit the size of bonuses. But from next January, senior bankers will have to defer at least half their bonus for at least three years. National regulators will be responsible for policing the legislation and have been given some discretion as long as they justify their policies.

There are also options for firms, such as hedge funds, to pay through other instruments if they do not, for example, have shares. Many bankers are being paid in restricted stock in the companies in which they work.

Nick Anstee, the Lord Mayor of London, said the UK and the City needed to build stronger, more pro-active links in the European Union when it comes to the policy-making agenda. He said: "That is why we are travelling to Brussels this week to meet again with [EU Internal Market] Commissioner [Michel] Barnier and ensure the City's voice on important changes to the regulatory landscape and their impact on the UK financial services industry is heard.

"This is particularly pressing given recent developments in the EU relating to remuneration.

Current and future EU proposals such as the new rules on bank bonuses and the AIFM [Alternative Investment Fund Managers] directive could have a significant impact on the UK financial services industry and particularly hedge funds and asset managers, despite their limited role in the global financial crisis."

Mr Anstee said it was "imperative" that European legislators remember the "contribution" made by the City to the continent's economy.

Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'