The European Union has agreed a package of financial laws as part of a sweeping reform which will include capping bankers’ bonuses at a maximum of one year’s basic salary or two-times pay if a majority of shareholders vote in favour.
The so-called Base III rules, actually the Third Basel Accord, is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk agreed by the members of the Basel Committee on Banking Supervision in 2010-11 and scheduled to be brought in this year.
However, the agreement, which was announced in Brussels last night (February 27th) after extensive talks, will mean that the rules will be enforced from 2014 and only if the proposals get the backing of a majority of EU states.
Prime Minister David Cameron has already said that he will “look carefully” at the proposed new regulations, as he is concerned that they will affect competition and compromise the UK’s position as an international financial hub, while Mayor of London, Boris Johnston, described the proposed policies today as “self-defeating”.
In fact, the Government has long argued against such absolute limits and many see the agreement as a major blow to the City of London, which houses some 144,000 banking staff and many more in related jobs.
However, the UK will be unable to veto the agreement and it is thought likely that its main points will become EU law, which will mean that from next year European banks will have to set aside more money to be more stable and, in the words of one of the deal’s negotiators, concentrate on their core business, “namely financing the real economy, that of small and medium-sized enterprises and jobs”.
Mackrell Turner Garrett Solicitors in London
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