MEP Othmar Karas: Bankers' bonuses should be capped at no more than twice the basic pay

29 March 2012

Karas substantiates this proposal with earlier calls which he made in 2011 in his draft Report on capital requirements for European banks, where he said "top salaries must be proportionate to the average salary in a financial institution".

Bankers should have their bonuses capped at no more than twice the basic pay, according to Othmar Karas MEP, European Parliament Rapporteur on tougher capital rules for banks (Basel III). Bankers should be forced to hand back bonuses if they fail to perform in the long run. "Bonuses completely beyond any relation to the basic salary cannot be explained to citizens and set out the wrong incentives. We cannot allow that the most irresponsible banker who takes the biggest risks is rewarded with the highest bonuses", said Karas. The Parliament's Economic and Monetary Affairs Committee discussed Karas's proposal this week. Such a cap on bonuses would be one of the fiercest new EU laws in this area since the beginning of the financial crisis.

Mr Karas stops short of proposing an absolute cap on bankers' pay. "To reward good and responsible conduct is needed to give sufficient flexibility to the banks", he said. The vote on these proposals will take place in April in the Parliament's Committee on Economic and Monetary Affairs.

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