Bloomberg News

Bonus Curbs May Be Required to Win Basel Law Deal, Borg Says

May 15, 2012

Bank bonus curbs may need to be accepted by European Union governments as part of a compromise deal with lawmakers on how to implement Basel capital rules in the region, Swedish Finance Minister Anders Borg said today.

The European Parliament is pushing for limits on bonuses to be included in the legislation, amid warnings from lenders that the move would make it harder for them to attract top talent. Borg said governments may have to yield to the parliament’s demand in exchange for tougher capital rules.

“If they are pushing us on bonuses, we might have to accept that,” Borg said. “It’s also very important to underline that also the parliament must be tough on capital requirements, because it’s either capital requirements or taxpayers’ money.”

Lawmakers and governments in the 27-nation EU face a January deadline to implement an overhaul of bank-capital and liquidity rules agreed on by the Basel Committee on Banking Supervision in the wake of the 2008 collapse of Lehman Brothers Holdings Inc. The rules would more than triple the core reserves that lenders must have to protect themselves from risk, and would force banks to hold a minimum amount of easy-to-sell assets to survive a credit squeeze.

Reconcile Differences

Borg and his fellow finance ministers overcame a deadlock by agreeing on how they will seek to apply the Basel rules in the EU. Their deal follows an accord yesterday among members of the EU parliament. Governments and legislators must now begin negotiations to reconcile their different approaches.

The first round of talks between members of the assembly and Denmark, which holds the EU’s six-month rotating presidency, is scheduled for May 23. The parliament will make bonuses a priority in the talks, Danish Economy Minister Margrethe Vestager told reporters today.

“There might be room for a bit of rules on bonuses and dividends,” Vestager said. EU Financial Services Commissioner Michel Barnier said he would also support curbs on bonuses, which in some cases have become “inexplicable.”

Borg said he welcomes elements of today’s deal that would allows regulators in a bank’s home country to also oversee institutions’ branches in other countries.

“This is for us very important because it will make it less complicated to reinforce capital demands on a company like Nordea,” Borg said. Stockholm-based bank Nordea Bank AB (NDA) is Scandinavia’s largest lender, with operations in Denmark, Norway, Finland and the Baltic States.

Borg said Sweden won necessary concessions during today’s meeting of ministers to ensure the country’s regulators can toughen rules for its lenders.

Sweden has insisted on the ability to make its biggest banks hold more capital, in an effort to avoid repeating the country’s banking crisis of the 1990s.

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net


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