Tougher rules needed on banker bonuses - MEP Karas 

 
 

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"A banking union in the euro area is a logical step forward" - Karas  

Extending loans, collecting interest and making a profit for their banks: that's the business of bankers who got richly rewarded for their services in the economic boom leading to the crisis. Too richly, say some, arguing that the possibility of big bonuses led bankers to take excessive risks, which got banks into so much trouble that they had to be bailed out by the taxpayer. Austrian Christian Democrat Othmar Karas says tougher rules on banker bonuses may be a part of the solution.

Karas is steering legislation on capital requirements through the EP, including proposals on bankers' bonuses. He spoke to us about the topic and also chatted with users of the EP's Facebook page.


What Facebook users wanted to know


Jenni Gren Black asked whether the EU, by adopting tougher rules on banker bonuses, risks seeing financial institutions moving to other countries. "There is no cap on bonuses, but I want a fixed ratio between the fixed salary and the bonus," Karas explained. "My suggestion is to limit the ratio of fixed salary to bonus at 1:1. Bonuses must not be a driver for short-sighted and risky action."


But won't that lead banks to increase the fixed part of traders' salaries? Clarisse Bergerol asked. "That's the decision of the shareholders and management board," said Karas, adding that even if they raise salaries the system would be more transparent and honest than low salaries and hidden bonuses.


Karas noted that the capital requirement directive (CRD IV) deals with much more than banker bonuses. "The Parliament is convinced that European banks must stand as firm as a rock in the international financial market. We want European banks to put aside more and better capital in order to be prepared for crisis situations."


"Enough own capital and liquidity. Transparency and efficient supervision," Karas said in response to Esa Mikkola's question about the most important ingredients for a strong banking system. 


A banking union in the euro area is a logical step forward, Karas said. "Since the introduction of the euro, it is clear that an integrated financial and budgetary framework is needed as well as a European guarantee scheme for systemically important banks." There has been enough talk, now the EU needs concrete action, he said.


You can debate bankers' bonuses on Twitter with the #cutbonuses hashtag and on LinkedIn via the link to the right.