UK ready to back EU bank reform - FT.com
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May 13, 2012 10:07 pm
By Alex Barker in Brussels
Britain is to drop some of its objections to the EU’s flagship reforms for the banking sector, removing the main political obstacle to a deal on one of the most divisive regulation issues in Brussels. During pugnacious talks earlier this month that ran to 2am, George Osborne, the UK chancellor, single-handedly blocked a compromise on legislation to enact the so-called Basel III international accord on bank capital. But in spite of warning that some provisions are “idiotic” and too soft, Mr Osborne is ready to back an agreement on Tuesday, on the basis that the final details will not stop the UK implementing Basel III and pursuing its flagship banking reforms. His decision to compromise will come as a great relief to Brussels and other EU finance ministers, who feared Mr Osborne planned to vote no and publicly condemn the package as falling short of the Basel III accord. It will also add to bafflement in Brussels over why Mr Osborne refused to sign off the deal at the last meeting, given that little in the text is likely to change and other finance ministers are unwilling to reopen substantial issues. A common position, when agreed, will allow member states to begin difficult negotiations with the European parliament, which must also endorse the text for it to become law. Big obstacles to a final deal remain, including EU lawmakers’ calls for stringent pay curbs. Parliamentarians will vote to decide on their demands on Monday, which are likely to include a ban on bankers’ bonuses exceeding fixed salary and rule-changes to boost lending to small business. Europe’s big investment banks are extremely alarmed by the bonus clampdown, which will be opposed by the UK-led block of member states. But given public anger over banker pay, senior diplomats fear their hands will be tied when fighting MEPs. Some concessions on pay are likely. Sharon Bowles, the Liberal Democrat MEP who chairs the committee spearheading the
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UK ready to back EU bank reform - FT.com
http://www.ft.com/intl/cms/s/0/63b617c6-9cfb-11e1-9327-00144feabd...
negotiations, said lawmakers will “take a firm line on remuneration”. “It is clear that these ultra-high levels of remuneration cannot continue,” she said. Uncertainty over the parliamentary talks is part of the reason Mr Osborne decided against making a stand on Tuesday, which would have risked Britain losing some of the ground it won. No significant changes have been made to the 2am text that Mr Osborne rejected. It still includes a limit on how high national authorities can raise capital requirements on banks without EU permission, and provisions that soften the Basel definitions of what counts as capital. But Mr Osborne is largely happy that nothing in the package stops the Vickers banking reforms from being implemented or from countries meeting the Basel III requirements, should they wish to. The compromise is also tougher on bank liquidity and leverage, another key UK demand. When rejecting the package, Mr Osborne did cite concerns over Vickers. While the substance is unlikely to change, these technical issues could be addressed with some kind of political commitment to iron them out at a later stage. Some of the concessions on flexibility will be subject to approval by parliament, which may push for tighter EU controls unless it makes headway on bonuses, an issue that has cross-party support among lawmakers. The Association for Financial Markets in Europe, which represents many global banks, has written to several MEPs warning that the rigid cap on bonuses will backfire and will encourage banks to increase salaries further, a trend that would increase systemic risk. Even so, some MEPs amendments even seek to toughen up the bonus curbs to threequarters of salary, but the measure is unlikely to be voted through. Similarly there is not expected to be majority backing for amendments requiring a binding shareholder vote on the bonus ratio.
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