The European Parliament and Council have reached agreement on a proposal whereby bankers' annual bonuses must not normally exceed their annual salaries and banks must hold more high quality capital to increase stability. The only possible exception, allowing bonuses of up to twice annual salary, would have to be authorised by holders of a half of a bank's shares.
To curb excessive risk-taking, the basic salary to bonus-ratio will be 1:1 but could be raised to a maximum of 1:2 with the approval of shareholders. This higher ratio would require the votes of at least 65% of shareholders owning half the shares represented, or of 75% of votes if there is no quorum. In order to encourage bankers to take a long term view, if the bonus is increased above 1:1 then a quarter of the whole bonus will be deferred for at least five years. The rules will allow minimum thresholds of high quality capital to be retained. Banks will be required to hold a minimum of 8% good quality capital (mostly Tier 1, the lowest risk form). The legislation would also require banks to disclose profits made, taxes paid and subsidies received country by country, as well as turnover and number of employees. From 2014, these should be reported to the Commission and in 2015 made fully public.