It might be that the Swiss authorities will need extra personnel at the borders and in the airports in the coming years. A flood of British bankers into Switzerland could at least be a consequence of the capping of bankers’ bonuses that the Council has voted to pass this week.
The Ministers of Finance from the EU member states decided on Tuesday to cap bonuses at 100 percent of the bankers’ annual salary, or up to 200 percent, if approved by the shareholders of the respective bank. The bonus capping is part of the Capital Requirements Directive (CRD 4) on stricter capital requirements for banks.
“I am pleased to report that we have a broad majority in favour of the compromise package we agreed with the parliament last week. On this basis, we asked our ambassador to finalise the negotiations with the Parliament,” said the Irish Minister for Finance and current President of the Economic and Financial Affairs Council (ECOFIN) Michael Noonan at the press conference, following the decision.
The expected British resistance
It is not easy being a Brit in the EU these days, and the greatest hurdle in putting together a compromise on this directive was not surprisingly the Brits, with London being the undisputed capital centre of the EU, and thus the home of a large number of banks and banking professionals standing to lose from these new requirements.
And along the way, since the trialogue
negotiations started in May last year, the Brits, led by finance minister,
George Osborne, have expressed their worries, and lobbied other countries to
His greatest concern is the fact that banks might leave London and seek shelter in other financial enclaves, such as Switzerland, which - for obvious reasons - will not be subject to the new requirements.
Osborne thinks that the capping will “push salaries up”, when the bonuses go down, and believes that awarding bankers for taking chances and winning was a good method to make sure that they pay for their mistakes as well.
However, the UK was not able to find support
for their case, and their 26 votes in the Council were not enough to ruin the
255 vote qualified majority, required to pass the agreement.
The CRD and the capping of bonuses were
proposed in the first place, as another initiative to prevent the current
financial, economic and social crisis from repeating itself.
The main idea is to limit the irresponsibility in the financial sector, and governments unwilling to touch them. The crisis started with the banks, and since then it has been continuously revealed that while ordinary people suffered more and more, the bankers had gotten and still got enormous bonuses.
“The crisis started in the American banking
sector and spread to part of European banking sector. And it as linked to
issues of liquidity, which we are addressing; to a shortage of capital, we are
addressing that point; sometimes also to poor governance out of lack of
supervision, and we addressed that point too,” said EU commissioner for
Internal Market, Michel Barnier, after the Council vote.
"The last cause really was irresponsibility generated to that extent by the fact that bonuses could be paid without limit to the point that certain bankers were paid more if they took bigger risks; and when the risks turn into catastrophe, disasters, bankruptcy, then it was the tax payer, who was called in to save all that. Well, that is finished,” he continued.
Another issue that has been discussed during the negotiations, is whether the member states could diverge from the overall EU requirements, as long as the capping is kept under 100 percent.
For instance, in Denmark, the limit was already before this agreement at 50 percent of an annual salary, and the Danish government was obviously not interested in the EU overruling this cap and allowing Danish banks to pay bonuses higher than 50 percent.
Final details needed
The Irish presidency had brought the topic to the table after the compromise obtained last week in the trialogue negotiations between the European Commission, the Council and the European Parliament.
The vote on Tuesday was not, however, a final vote to adopt the directive. It was technically an endorsement of the results of the trialogue negotiations and a go-ahead to the Permanent Representatives Committee (COREPER), to finish the work and sort out the remaining details before the CRD 4 can take effect, most likely early next year.
This will happen in close collaboration with the Commission and the Parliament, which is expected to vote on the directive at the April plenary in Strasbourg.