EU Nations to Seek Bonus Deal With Lawmakers in Basel III Law

The European Union will seek to broker a tentative compromise on banker bonus curbs today as diplomats and lawmakers attempt to overcome 8 months of conflict on how to apply Basel rules to the bloc’s lenders.

Ireland, which holds the EU’s rotating presidency, will offer revised proposals on bonuses for the negotiations, according to two EU officials, who aren’t authorized to be cited by name. Governments have accepted that any deal on the Basel law will need to contain binding pay rules if it is to win European Parliament approval, said the officials.

The EU has struggled to agree on legislation to apply the Basel banking standards, which were published in 2010 as part of efforts to prevent any repeat of the financial crisis that followed the collapse of Lehman Brothers Holdings Inc.

Ireland’s new proposal will amend a compromise discussed in December by the parliament and Cyprus, the previous EU presidency holder, the officials said. That plan would have banned bonuses greater than twice a banker’s fixed pay. A majority vote by shareholders representing two-thirds of the bank’s ownership would have been needed to give a bonus larger than annual salary.

Legislators and national officials have clashed since May on bonuses, requirements for systemically-important banks, and how much freedom national regulators should have to impose their own more-stringent capital measures on lenders.

Lawmakers have insisted that the law include binding limits on variable pay as part of a quest to reshape lenders as utilities rather than money-making machines. The assembly’s economic and monetary affairs committee called in May for a ban on bonuses that top fixed pay.

U.K. Opposition

While a number of nations indicated at a prior meeting that they could support the December plan, it was opposed by several governments, including the U.K.

A spokeswoman for Ireland’s EU presidency said that it would seek to settle the key outstanding issues in the draft law at today’s meeting, and that negotiations have entered their final stretch.

Diplomats yesterday reviewed a British counter proposal on bonuses, the officials said. That plan would ban non-deferred cash bonuses that are larger than fixed salary, while granting exemptions to banks’ non-EU based subsidiaries, according to a copy of the proposals obtained by Bloomberg News.