Bankers' Bonuses capped by MEPs

12.00.00am BST (GMT +0100) Wed 7th Jul 2010

MEPs today backed moves to crack-down on bankers' bonuses that encourage risky financial decisions and led to the recent financial meltdown. Banks were also told to hold reserves to guard against risky investments so they are not forced to fall back onto the taxpayer.

Upfront cash bonuses will be capped to between 20-30%, with a large part of the bonus being dependent on the long-term performance of an investment. Furthermore, at least 50% of a bonus must be paid as "contingent capital", which can be converted back into cash should a risky investment cause a bank to run into difficulty.

South West MEP Graham Watson said the new rules will encourage responsible decision-making and protect tax-payers money;

"The financial crisis and recession that has hit ordinary people so hard was brought on by ridiculous bonuses and excessive risk taking. Bank bosses have failed to get their houses in order, so the EU has taken action.

"These new rules mean that bonuses will no longer encourage "casino-style capitalism" and banks, not the taxpayer, will foot the bill for risky investments that go wrong.

"The size and complexity of banks means that European countries had to take this step together but in doing so, has set an important benchmark for the rest of the world."