BRUSSELS — The European Union moved a step closer early on Thursday to imposing strict curbs on bonus pay for bankers, which has been blamed by many politicians for inciting the risk-taking behavior that triggered the recent financial crisis.
A provisional agreement struck between the European Parliament, the European Commission and national representatives could mean that the coveted bonuses many bankers receive are capped at the level of their annual salaries starting next year.
The agreement, as it stands, would be a blow to Britain, which partly relies on generous remuneration packages to ensure that the City of London remains the biggest financial center in Europe.
A majority of E.U. states still must give their final approval for the legislation to go into force and there are expected to be more discussions on the rules at the European Parliament and among governments.
The goal of the bonus cap proposal is to balance many different interests, including “the desire to limit bankers pay while maintaining a competitive European banking sector,” Michael Noonan, the finance minister of Ireland, which holds the rotating E.U. presidency, said in a statement after the talked ended.
Under the proposal, the bonus rules would also apply to bankers employed by E.U. banks but working outside the bloc, for example in New York. E.U. authorities are drafting separate rules that could restrict remuneration at private equity firms and hedge funds.
Mr. Noonan said he would present the plan at a meeting of finance ministers next week.
An E.U. diplomat stressed that a significant amount of technical work still needed to be done before the rules were finalized by governments.
The diplomat, who spoke on customary condition of anonymity, also said the rules would contain a review clause requiring. authorities to assess whether the rules were having damaging effects on the banking sector.
The proposal would also allow higher bonuses if a sufficient number of shareholders agreed.
It is part of a set of laws requiring higher capital requirements for banks, called the Basel III rules, which the E.U. officials also approved early Thursday.
Mr. Noonan said the Basel III package would “make sure that banks in the future have enough capital, both in terms of quality and quantity, to withstand shocks” and that “will ensure that taxpayers across Europe are protected into the future.”
European Union Agrees on Plan to Cap Banker Bonuses
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European Union Agrees on Plan to Cap Banker Bonuses
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European Union Agrees on Plan to Cap Banker Bonuses
