Main focus of Thursday, July 8, 2010

EU caps bankers' bonuses

The EU Parliament has decided that bankers' bonuses must in future be linked to their salaries, and that only 30 percent of bonuses may be paid out immediately. Europe's press complains that the new regulations have too many loopholes and will be unable to prevent a new financial crisis.

Hospodářské noviny - Czech Republic

For the business paper Hospodářské noviny the stricter rules on bonus payments for bank managers passed by the European Parliament represent a political gesture of little consequence for bankers: "From the outside it looks simple: bankers are after the biggest possible gains and will run any and every risk to achieve them. And in doing so they destabilise the financial markets. ... Taking aim at bankers' incomes is a step to appease voters and maintain social peace. ... But it's an open question how well this works in practice. When Britain introduced a 50 percent tax on bonuses exceeding 25,000 pounds [around 30,000 euros] last year the banks raised bankers' fixed incomes and lowered their bonus payments. True, the state's revenues rose by around two billion pounds [around 2.4 billion euros], but the bankers were certainly not any poorer as a result. Now all of Europe's banks will no doubt adopt a similar strategy. ... Consequently the bonus regulation can only be considered a first step." (08/07/2010)

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Tiroler Tageszeitung - Austria

The new rules for bonus payments offer banks too many loopholes, writes the daily Tiroler Tageszeitung: "In practice this is nothing other than the status quo cast in the form of an EU law. It is already normal practice in the real economy for most bonuses to be paid out in the form of shares. With its percentage formulations the new rule is more a loophole than a law. The original idea in Strasbourg was to cap benefits with a nominal upper limit. The EU Parliament failed in this attempt - understandably. Because there is no legal basis for telling the private economy how much it can pay its top managers. This guideline is too harmless to be effective. By contrast, top earners at the banks will be rubbing their hands in glee. Their intensive lobbying efforts have definitely paid off." (08/07/2010)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Banks, » Europe
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Die Welt - Germany

Despite the new EU regulations on bankers' bonuses there are still many factors that could precipitate a new financial crisis, writes the conservative daily Die Welt: "Particularly given that [the EU] basically summarised what is already practised at many banks, at least at the management level. A series of large institutions have either already readjusted their bonus systems or are in the process of doing so. So the performance of legislators and regulators must therefore be measured in other areas: When will there finally be binding rules on how much capital banks must have to cover their riskier dealings? How can it be guaranteed that the financial sector covers part of the costs of future crisis? There is much discussion but few concrete results. Europe going solo on this may serve to give the rest of the world a wake-up call, but unfortunately not much more." (08/07/2010)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Banks, » Europe
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