EU banks agreement is a curate’s egg: very good in parts

28-Feb-2013 @ 18:0

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Anthea McIntyre Anthea McIntyre

Anthea McIntyre Anthea McIntyre

Last night’s agreement on the Capital Requirements Directive secured the main safeguards for the real economy and is overall a good deal for almost everyone in the UK, despite the caps on a few bankers’ bonuses, Vicky Ford MEP, one of the parliament’s lead negotiators from the European Conservatives and Reformists group, said this morning.

Mrs Ford has secured the UK’s main negotiating priority, which is to deliver stronger global banking standards in capital, liquidity and leverage. As the deal does allow many exemptions for different types of European banks it was important that countries could also go further than the EU’s minimum standards for capital requirements.

In addition, amendments regarding hedging of commercial risks were included, which were key to UK industrial companies wishing to avoid additional impact on investment firms aimed at pensioners and savers.

The special status of building societies and the co-op bank have been recognised; and protections have been safeguarded for mortgage payers who run into temporary difficulties.

Mrs Ford has long argued that whilst it is right to regulate bonus strategies that encourage excessive risk-taking, a blunt cap could result in remuneration packages becoming more front-loaded, going against the desire to ensure that staff are held responsible for their long-term performance. Therefore in negotiations last night she encouraged a means to recognise and incentivise longer-dated pay schemes within an overall cap.

However, she believes there is a chance that a cap on bankers’ bonuses could risk relocation for certain banks currently headquartered in the EU, if they find that their staff in faster-growing parts of the world are being poached by non-European banks.

Speaking after the agreement, Mrs Ford, UK Conservative MEP for the East of England, said:

“This deal is a curate’s egg: some bankers may find their bonuses reined in, but there are many positive elements aimed to help savers, pensioners and businesses.

“This directive was Europe’s means of introducing the global agreement from the Basel committee.

“We have agreed our main objective of allowing countries like the UK to put in place further safeguards that ensure financial stability and go further than the EU’s minimum standards, and to separate our retail and investment banks.

“Overall this agreement will be positive for the real economy. We have managed to include provisions that will help savers and pensions, building societies and manufacturing industry; and we have included measures that will free up financing for small businesses.

“I do fear that a cap on bankers bonuses is a blunt instrument but I was pleased to sharpen it by including elements that encourage bankers to take long-term decisions, otherwise they risk their bonuses being clawed back.

“Of course some top bankers will be affected by the bonus cap but I feel that we have managed to produce a deal that will strike the right balance for the majority of bankers who take responsible decisions. If the bonus cap is shown to cause bankers to begin relocating outside the EU then we will have the ability to swiftly look again at the provisions in place through an early review.

“This has been three years of work and it is by miles the most complicated piece of legislation that the European Parliament will pass. International banks do need international regulation and the UK’s banks have regularly told me that being part of the single market is vital to them.”

“We have tried to limit the unintended consequences of this legislation. We may not have got this 100 percent right but I hope it is a step in the right direction.”

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