A large majority of the European Parliament have agreed on a new package, called Capital Requirements Directive 4 (CRD4), that encompasses new rules regarding bankers’ bonuses and bank capital requirements, reports BBC News. The package will be applied to all 27 members of the European Union and is expected to commence the beginning of 2014. CRD4 has been created in effort to dodge similar high-risk lending dilemmas that led to the financial meltdown in 2008.
The center-right constituents of the European People’s Party (EPP) commented on the new rules, stating to BBC News, “They are the most comprehensive and most far-reaching banking regulation in the history of the EU.”
The new rules will bring an end to excessive bonuses, capping banker bonuses at 100 percent of their annual salary. They caps may even be extended to 200 percent if authorized by shareholders.
We’d love to be your preferred source for news.
Please add us to your preferred sources list so our news, data and interviews show up in your feed. Thanks!
EU commissioners have blamed the liquidity crisis for the credit crunch, and have thus mandated banks to have liability coverage for a minimum of 30 days during times of financial pressure. They are being asked to keep a minimum of eight percent capital of their risk-weighted assets. Ordering banks to maintain liability buffers will help hinder reckless lending and depletion.
Jose Manuel Barroso, the European Commission president, referred to the new capital requirements and preserve cushions when he said they would enable banks to, “absorb future shocks themselves, without asking the taypayers for help.”
In addition to these rules, the European Parliament Members (MEPs) are strongly encouraging lenders to invest more into small businesses and startups. Focusing on lending to these sectors will ostensibly offer growth in the real economy.
Accompanying these rules are new expectations for banks to provide more information about annual profits and taxes. The data submissions will requested to be a country-by-country basis.
UK, the EU member with the highest number of daily trades and a dominant financial position, already holds a tough administration for banker salary and bonus caps. UK finance ministers agreed to the new package, but warned that banks in the UK may increase salary pay to compensate, which would render the cap useless.
A UK finance minister debated whether or not the package was fully accommodating but agreed that the CRD4 would ultimately improve bank legislation and was a “move towards a global standard.”
Read the full article at BBC News here.
Add as Preferred Source
