Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-07-06-Speech-2-453"
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"en.20100706.30.2-453"2
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"Madam President, firstly, I would like to put on record my thanks to those who have helped to secure the agreement we have reached on CRD III (Capital Requirements Directive) regulating bank capital and bankers’ pay and bonuses. A very special thanks goes to my shadows in the Committee on Economic and Monetary Affairs, to the staff, and also to Commissioner Barnier for his continued support for the committee’s proposals, and of course, not least, to the Spanish Presidency for their persistence and efforts in 12 hours of trialogues to mediate between Parliament’s negotiating team and the 27 Member States.
The final law we are debating today fully implements the Basel rules on capital against the trading book and re-securitisations and it robustly implements the international remuneration rules agreed at the G20. Financial experts all agree that a high risk short-term bonus culture, combined with a lack of capital, were central elements in the 2008 global financial crisis. Governments and taxpayers ended up bailing out the banking sector across the European Union with an injection of some EUR 3.9 trillion of support. In my Member State, the UK, an estimated GBP 1.2 trillion of support was extended, almost equivalent to one full year of GDP. Savers and investors saw the value of their pensions and investments decline as a result of the banks’ risky practices. The bankers walked away with the short-term profits from these risky practices, while the risks they took will remain on the banks’ books for years to come.
The new law amending the Capital Requirements Directive addresses these fundamental flaws and weaknesses in the banking system which led to the crisis. It will force banks to hold more capital against riskier activities on the trading book. The law also forces banks to reform their remuneration and bonus practices with rules that break the link between financial reward and excessive risk-taking. The effect of Parliament’s amendments is also to ensure that those remuneration policies, first and foremost, prioritise the health and stability of a financial institution and indeed, lending to the real economy.
We are constantly told by the banks that they have learned the lessons of the crisis. If that is the case, why did the Bank of England financial stability report state in June that the proportion of bank revenues allocated to salaries and bonuses has, in fact, increased since the banking crisis? The extra GBP 10 billion paid out by UK banks in salaries and bonuses represents GBP 10 billion that could have been put towards banks’ capital and, as such, support, as the Bank of England makes clear, around GBP 50 billion of lending to small businesses and families. Furthermore, the Bank of England reports say that lending to small and medium-sized enterprises in the UK has actually declined in recent months and that mortgage lending is expected to contract in the next few months.
So, colleagues, at a time when governments across the EU are making substantial budget cuts, scaling back public services and support to families and businesses, we cannot continue with a banking culture that prioritises bankers’ pay and perks over sustaining capital and credit for Europe’s economic recovery. It is therefore imperative that these rules on bonuses apply in 2011.
These rules are deferral, in line with the business cycle with annual review clawback; tough measures for bailed-out banks; a cap on the ratio of bonus to fixed salary; payment in contingent capital alongside shares; increased transparency and accountability and improved corporate governance; and, of course, coverage of bonus-like pensions so a banker responsible for the collapse of his own bank will no longer be able to walk away with a GBP 16 million pension pot.
Parliament has insisted on a tough interpretation of the G20 principles to ensure that the upfront cash proportion of a bonus is strictly limited. Paying a large part of the bonus in cash without any deferral or assessment of actual performance leaves, the Parliament believes, an unacceptable incentive for taking dangerous short-term risks.
Colleagues, we have a duty, as legislators, to defend the taxpayers’ interest. We have a duty to respond to the public’s concerns. Our voters demand and expect banks to prioritise stability and lending over bankers’ own pay and bonuses. In the last two years, since 2008, the banks have failed to reform their structures. They have failed to do this and we are now doing the job for them in order to rebuild trust and confidence in Europe’s banking system."@en1
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