The European Parliament has today [Tuesday] overwhelmingly voted for a banking reform package that will cap bankers’ bonuses, require added capital reserves for banks in the event of a future crisis, and provide derogations for lending to small and medium sized enterprises.After calls from the Greens-European Free Alliance group – of which the SNP is a member – bankers’ bonuses can now only be 100% of the salary, rising to 200% of the shareholders agree, a move which the UK government lobbied against in the Council of Ministers.
Tier 1 capital requirements (the best quality capital) will be doubled, and new liquidity requirements will ensure that banks have enough liquid assets to tide them over in the event of a market crisis.
There will also be a reduction in capital requirements for banks’ lending to small and medium-sized businesses, to spur growth in the real economy and support our local communities.
Commenting, Member of the European Parliament Alyn Smith said:
“This is a win-win for everyone in Scotland.
“Finally we are seeing some much needed regulation of the banking sector, despite the opposition of the UK Government.
“Capping bonuses for bankers’ is simply common-sense given the perverse incentives to take unnecessary risks implicit in pre-crisis remuneration structures, and should have happened a long time ago.
“The banking sector has for too long experienced a culture of entitlement and invincibility. The irresponsible lack of regulation by consecutive governments during the ‘boom’ years is what led to the economic crash of 2008 and it has taken the EU to step in and get the sector in order : a necessary and inevitable step given the inherent cross-border nature of the financial markets, and an example of the kind of effective European co-operation scorned by this Tory Government.
“The vote today will not only restrict bankers’ bonuses however; by introducing derogation from the capital requirement rules it will be easier for SMEs to borrow from the banks and boost local economies across Europe.
“Despite the UK dragging its heels, this is a fantastic example of how working with the EU can create that fairer and more equal society that we all want to see.”