European Parliament Agrees on Bank Bonus Limitations
July 7, 2010
The move comes after a major financial overhaul in Europe, with each of the 27 EU countries taking steps separately to cut spending to reduce massive deficits.
But plenty had to be done on a massive scale, and a cap on the bonus system allowed to banks is hoped to be one of several shifts in policy that could prevent another crisis in the future.
According to the BBC, banks will now no longer be able to dole out more than 30% of their bonus in immediate cash for small to average bonuses, or 20% for large ones. The rest of the amount will be paid out in installments over time, based on performance.
Hedge funds will also see a limitation placed on payouts, with a sharp reign in of out-of-control profits from risky financial milking.
“These tough new rules on bonuses will transform the bonus culture and end incentives for excessive risk-taking,” MEP Arlene McCarthy was quoted by the British media source.
It was an interesting compromise from the suspected cap that would have been put on the amounts of the bonuses themselves, as well as on salary. Neither will be affected; rather, the way it is paid out, the reasons for reception, and the amount of time it takes have been changed.