EU approves strict banking bonuses

The European Union has agreed a
deal placing new limits on bankers’ bonuses from next year.

Under a deal agreed with the
European Parliament, bankers will receive no more than 30 per cent of their
bonus immediately and in cash, or 20 per cent for larger bonuses.

The remaining bonus payments will
be delayed and linked to long-term performance, with 50 per cent paid in
shares.

Hedge funds will also be covered by
the new rules.

That will place the pay of hedge
fund managers in the City of London under regulation for the first time.

“The new rules won’t make a
big difference to bankers based in London,” he said.

“The Financial Services
Authority has already imposed conditions on them which many bankers would see
as tougher.

“But the rules will have a big
impact on hedge funds and other asset management firms.”

The new rules have been agreed by
EU member states and the European Parliament, though the parliament will hold a
formal vote next week.

The agreement includes proposals to
link bonuses more closely to salaries and the long-term performance of the
bank.

Large severance packages for
departing executives will also be limited.

“These tough new rules on
bonuses will transform the bonus culture and end incentives for excessive risk
taking,” said Arlene McCarthy, one MEP involved in negotiating the deal.

The limits will apply to all 27 EU
member states, although similar rules are already in place in countries
including the UK.

However, the rules do not limit the
size of bonuses that can be paid to bankers, only the proportions that must be
paid in cash and shares, and the timing of those payments.

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