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EU deal hammers bonuses

Euro-mps have backed a crackdown on bankers' bonuses - to come into force in time for this year's round of top-up payouts.

The European Parliament formally endorsed a deal reached last week at talks between representatives of EU governments, the European Parliament and MEPs to curb the "bonus culture" and end risk-taking in the economy.

After the vote Liberal Democrat MEP Sharon Bowles said the new rules would mean "no more Fred Goodwins" - a reference to the former Royal Bank of Scotland chief executive described as "the world's worst banker" for his role in the bank's near collapse and the need for a £45.5bn taxpayer bailout.

His massive payout for walking away - a £2.7m lump sum and a £703,000-a-year pension - caused outrage.

Under the new accord, banks will still be able to set bonus levels, but would be stopped from paying them out in full, in cash, on time. Instead immediate cash payouts would be capped at 30% of the total bonus and at 20% for very large bonuses. Half of any up-front payout would be in the form of "contingent capital" - funds which are recoverable first if the bank runs into trouble.

Payment of the rest would be deferred and made conditional on long-term banking performance.

"Since 2008 the public has had to put up with seeing top bankers continuing to take home millions in bonuses, while they see their own homes repossessed," said Ms Bowles after the vote.

Labour MEP and vice-chairman of the European Parliament's Economic and Monetary Affairs Committee, Arlene McCarthy, said it had a duty as legislators to respond to the public's concerns about the obscene bonus culture. She said banks had so far failed to act since the 2008 financial crisis, thus prompting the move. The UK Government has backed the crackdown but warned that the measures "must be implemented with equal force in all major financial centres".

A bank bonus code is already in place in the UK, but the EU deal covers hedge funds, 80% of which are based in the City of London and which have not been targeted before.

European Financial Services Commissioner Michel Barnier said the measures "send a strong political message: there will be no return to business as usual".