EU Agrees to Cap Bankers' Bonuses

European Union officials have struck a provisional deal on new financial rules, including capping bank bonuses.

Under the agreement, bonuses will be capped at a year's salary, but can rise to two year's pay if there is explicit approval from shareholders.

Top bankers and financial traders can earn bonuses multiple times their base salaries. But there has been public outrage over bonuses following the huge bail-outs of banks.

The agreement was reached during eight hours of intense talks in Brussels between members of the European parliament, the European Commission and representatives of the bloc's 27 governments.

Othmar Karas, the European Parliament's chief negotiator, said: "For the first time in the history of EU financial market regulation, we will cap bankers' bonuses.

"The essence is that from 2014, European banks will have to set aside more money to be more stable and concentrate on their core business, namely financing the real economy, that of small and medium-sized enterprises and jobs."

But Joe Rundle, head of trading at ETX Capital, in London, said the cap would backfire. He told the BBC: "It will drive up fixed salaries to compensate. Businesses that do not need to be inside the European Union will leave. And when banks invest in future divisions, it will be outside the EU."

The deal paves the way for Basel III, an overhaul of banking rules.

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