European Union lawmakers rejected an attempt by national governments to water down a planned cap on banker bonuses as part of negotiations on a Basel capital law.
Political groups spurned a compromise proposal by Denmark, which holds the presidency of the EU, to cap bonuses at two or even three times a banker’s fixed pay, with a loophole that would allow even larger bonuses approved by shareholders, said Philippe Lamberts, a Belgian member of the EU Parliament. The offer was made during meetings on the draft law, which must be approved by governments and the assembly.
“The political groups are agreed that this would remove any meaning from the regulation,” said Lamberts, who is leading work on the draft law for parliament’s Green group. Members of the assembly have sought to ban discretionary pay awards that are larger than a banker’s normal salary. Talks on the draft law “will take us well into September,” Lamberts said.
Public outrage and shareholder rebellions have forced some banks to retreat from their initial pay plans. Barclays Plc Chief Executive Officer Robert Diamond agreed to forgo about 11 percent of his total compensation until the bank increases profits. In a non-binding April vote, Citigroup Inc. shareholders voted to reject that bank’s executive pay plan.
Preben Aamann, a spokesman for the Danish presidency, declined to comment on the negotiations on the draft law.
Michel Barnier, the EU financial services chief, has called for curbs on pay awards that defy “all reason, common sense and morality.” Lawmakers in the parliament have sought to pre-empt this by inserting curbs into the bloc’s draft law to implement international bank capital rules agreed on by the Basel Committee on Banking Supervision.
Lawmakers and national governments adopted competing proposals last month to implement financial regulation rules, with the parliament seeking a one-to-one ratio on bonuses to pay, and the 27-nations not including any pay standards.
The two sides have so far held eight meetings to reconcile their differences, Lamberts said. None of the 10 to 12 “key divisive issues” have been settled, he said.
“The longer it takes to reach agreement, the more the economic and financial environment will have changed and the more it will look like these proposed measures are closing barn doors long after the horses have bolted,” Richard Reid, research director for the International Centre for Financial Regulation in London, said in an e-mail.
In addition to bonus rules, the negotiations include looking at how much flexibility national regulators should have to impose tougher capital rules on banks than required under EU law, as well as what additional requirements should be imposed on systemically important lenders.