Bankers in Europe face a cap on bonuses as early as next year, following agreement in Brussels on Thursday to introduce strict new curbs. Politicians hope the move will address public anger at financial sector greed.
The agreement, announced by diplomats and officials after late-night talks between EU country representatives and the bloc’s parliament, mean bankers face an automatic cap on bonus payouts at the level of their salary.
If a majority of a bank’s shareholders vote in favor, that ceiling can be raised to two-times pay.
“For the first time in the history of EU financial market regulation, we will cap bankers’ bonuses,” said Othmar Karas, the Austrian lawmaker who helped negotiate a deal.
Such limits to bankers’ pay, which is set to enter EU law as part of a wider overhaul of capital rules to make banks safer, will be popular on a continent struggling to emerge from the ruins of a 2008 financial crisis.
But it represents a set back for the British government, which had long argued against such absolute limits. The City of London, the region’s financial capital with 144,000 banking staff and many more in related jobs, will be hit hardest.
Ireland, which holds the rotating EU presidency and negotiated what it called a “breakthrough”, will now present the agreement to EU countries. The backing of a majority of EU states is needed for the deal to be finalized.
The change in the law will be introduced as part of a wider body of legislation demanding banks set aside roughly three times more capital and build up cash buffers to cover the risk of unpaid loans, for example.