EU banker bonuses held down by Parliamentary decree

The blight of worldwide economic crisis has prompted European Parliament to vote in favor of capping EU banker bonuses, 625-28. Excessive pension payouts will even fall under new guidelines. Associated Press reports indicate that any such short-term cash bonuses within the next year will be subject to the decision. It's a move the European Union hopes the rest of the world will follow in kind.

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EU banking decision will put hold on advance cash bonus dollars

Beginning in 2011, advance EU banker bonuses will only be allowed to reach 30 percent of annual advance loan cash. Seventy percent will be withheld until it is certain that company performance warrants the remainder of the annual bonus for the banker. The operative notion is that withholding many of the bonus will prod EU banker bonuses based upon on performance, rather than a gentrified system. Michel Barnier, the EU financial services commissioner, told the AP that "There could be no return to business as usual".

For extra-large bonuses, advance withdrawal is limited to 20 percent

Banks where executives receive extra-large bonuses should expect to be able to take a maximum of 20 percent early. European Parliament has neglected to numerate what constitutes a "large" bonus so far. All 27 European member countries will adopt the new cap on EU banker bonuses. Countries like Great Britain, France and Germany reportedly had effective banker bonus caps in place.

Banks must hold a minimum capital amount

As part of the new rule, European banks beginning in 2012 may have to keep at least a minimum level of operating capital on hand to cover risky ventures like mortgage-backed securities. Three to four times more capital could be required than normal, writes the AP. However, banks bound by the new rules are concerned that they'll end up having to set aside even more emergency cash and will lose out when it comes to profit. The likely public response would be that the banks brought this on themselves, and it's time to pay.

Citations:

USA Today

usatoday.com/money/world/2010-07-07-eu-bank-bonuses_N.htm