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Thursday, July 08, 2010

Bankers' Bonuses

The European Parliament has approved a plan to place limits on bankers' bonuses from as from next year, the rule will be applicable to all 27 EU members.

Bankers will receive no more than 30% of their bonus immediately and in cash, the limit falls to 20% for larger bonuses.

The remaining payments will be deferred, and linked to long-term performance.

There will be no cap on what bankers can be paid.

This will have precious little effect on bankers:

1 The rules will not be enforced until next year. Therefore this year bankers will ensure that bonus payments are front end loaded, to avoid the limit next year.

2 Pay levels will be increased to avoid the limits.

3 Banks will circumvent the rules by paying bonuses offshore.

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