European Parliament votes in favour of bankers’ bonus cap

Members of the European Parliament (MEP) have voted in favour of imposing a cap on bankers’ bonuses.

If formally approved by the Council of Ministers, from 1 January 2014, the basic salary-to-bonus ratio will be 1:1. This could be raised to a maximum of 1:2, if approved by at least 66% of shareholders owning half the shares represented, or by 75% of votes if there is no quorum.

To encourage bankers to take a long-term view, a minimum of 25% of any bonus exceeding 100% of salary, must be deferred for at least five years.

The changes, which were agreed in March, were put to a vote as part of the larger European Union (EU) banking reform package. Banks will be supervised by EU member states’ competent authorities, in collaboration with the European Banking Authority (EBA).

Othmar Karas, an Austrian member of the European Parliament (MEP), said: “The new set of rules is the furthest-reaching banking regulation in the EU to date.

“The new single rule book for all its 8,200 banks is the foundation on which the EU banking union must be built.

“The single supervisory mechanism will be the roof. We must now add the walls: the resolution framework for banks and deposit guarantee schemes.

“As legislators, we do not regulate salary levels. The rules on bankers’ bonuses will instil fairness and transparency, and contribute to a change in banking culture.”