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CORRECTED: EU delays bank bonus cap as Britain offers hope of deal

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(Globalpost/GlobalPost)

European Union governments on Tuesday delayed a decision on controversial bank bonus caps after Britain offered hope of an overall deal if given more time to negotiate.

EU finance ministers meeting in Brussels agreed to take another look at plans to cap bonuses at the same amount as is paid in a fixed annual salary, or twice that sum if shareholders approved the payment.

British Finance Minister George Osborne told his peers during a public debate Tuesday that "we can’t support the proposal currently on the table."

However, he added, that "if we make progress in the next couple of weeks … I would hope that the finance minister of the largest financial centre in Europe can support (an amended legislative text) wholeheartedly."

The European Parliament is planning to vote in April on the accord drawn up with the Irish EU presidency which introduces new internationally agreed legislation to strengthen banks and make them better able to withstand any future crisis.

Parliament insisted that a cap on bank bonuses be included at the same time so as to satisfy public anger over the issue.

After last week's accord was worked out, Switzerland voted Sunday strongly in favour of sharp curbs on executive pay, widely blamed for the excessive risk-taking which contributed to the 2008 global financial crisis.

The new regulations called Basel III primarily tighten up bank capital requirements. They were due to take effect this January but next year now seems the most likely.

Britain is home to some three quarters of the EU's finance industry and London has long maintained that bonus and salary caps would make Europe's banking sector uncompetitive.

Osborne said, however, that he accepted and understood public anger at exorbitant remuneration that brought banks and then governments to their knees in the last five years.

He told his counterparts that Britain was "absolutely clear that more and more of the pay paid to bankers should be tied to long-term performance."

He pleaded that banking excesses had already been curbed, arguing that "bonuses in London are today 80 percent less than at the height of the irresponsibility in the banking system."

And he warned that the plans agreed by the EU's Irish chair and the Parliament would leave taxpayers exposed once more.

"It will push salaries up, it will actually make it more difficult to claw back bonuses when things go wrong," Osborne said.

An official said negotiations would now centre on how to steer permissible incentives more towards the long-term, with extra safeguards enabling "clawbacks" when things go wrong.

Osborne won crucial backing during the meeting from Germany's Wolfgang Schaeuble, who said the "broad concensus" of support around the table was adequate but not sufficient.

"I think if we could achieve (an agreement) in the final decision, not only a qualified majority, it would be better" than isolating London in another backs-to-the-wall vote, he reasoned.

Ireland's Michael Noonan, summing up, said officials and the European Parliament would work further on the proposed caps and timescales for banks to apply them.

"We will try to iron these out in the coming weeks," said Noonan.

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http://www.globalpost.com/dispatch/news/afp/130305/corrected-eu-delays-bank-bonus-cap-britain-offers-hope-deal