On Tuesday, 16 April the European Parliament agreed on a reform package to strengthen EU banks. This massive and the most comprehensive package so so far will cap bonuses in the banking sector, enlarge required capital provisions to ensure that the banks are able to cope with any emergency and finally, it will promote growth by making it easier to lend to SMEs.
The most discussed topic of the regulation are bankers´ bonuses. As the EU cannot regulate salaries, it decided to set the basic salary-to-bonus ratio to 1:1 to avoid speculative risk taking. EU banks will be also required to set aside a minimum of 8% good-quality capital to pay depositors and creditors in an emergency. Banks will be encouraged to lend to SMEs by lowering nominal risk of these loans. Furthermore, the legislation will require banks to publish their profits, turnover, taxes paid and subsidies received. From 2014 these figures will be available to the EC, from 2015 to the wide public.
The package includes a Capital Requirements Regulation (CRR) and a fourth edition of Capital Requirements Directive (CRD IV). The new rules must be formally agreed by the European Council until January 2014.
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