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EU agrees to cap bankers' bonuses as part of new financial legislation


European Union officials have agreed a new financial reform package including a cap on bankers' bonus payments. The deal, designed to calm public anger at the financial sector, could be introduced as early as next year.

Under the provisional agreement bankers' bonuses will be automatically limited to a year's salary, making it one of the world's strictest pay curbs.

That ceiling could be lifted to a maximum of twice an employee's annual salary, if the move gets the go-ahead from a majority of a bank's shareholders, Othmar Karas, the European Parliament's chief negotiator, said early Thursday following late-night talks in Brussels.

"For the first time in the history of EU financial market regulation, we will cap bankers' bonuses," Karas said.

The deal, reached during eight hours of intense negations, is part of a wider overhaul of European financial legislation designed to make banks less liable to collapse in the aftermath of the 2008 financial crisis.

EU lawmakers, the EU Commission and representatives of the bloc's 27 governments also agreed to introduce higher capital requirements for banks and build up cash buffers to cover the risk of unpaid loans.

"This overhaul of EU banking rules will make sure that banks in the future have enough capital, both in terms of quality and quantity, to withstand shocks. This will ensure that taxpayers across Europe are protected into the future," said Ireland's Finance Minister Michael Noonan, who led the negotiations for 27 governments.

Opposition from Britain

Britain, which is home to Europe's biggest financial industry, long argued against any bonus payment caps, saying they would drive away talent and restrict growth. London had tried to persuade other EU nations against it, but failed to garner much support.

Most governments backed the bonus cap in order to ensure that other so-called Basel III rules are introduced. Consensus over the cap means the Basel III code of capital standards, drawn up by international regulators to reform banking following the financial crash, can come into force by the January 2014 deadline.

In order for the deal to enter into law, it first needs the backing of a majority of EU states, although that is largely expected to be a formality.

ccp/jm (AP, Reuters)

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