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EU bank supervisors focus on bonuses, cyber resilience, conduct

Friday, April 17, 2015 - 00:01

[LONDON] European Union regulators will focus this year on whether banks are complying with the bloc's new cap on bonuses, and doing enough to withstand cyber attacks and prevent misconduct.

The cap, limiting bonuses to no more than fixed salary, or twice that amount with shareholder approval, became law last year but in practice applies to awards handed out from this year onwards.

Several banks have topped up pay with "allowances" to help soften the cap's impact, a step the European Banking Authority (EBA) has said breaks EU law in many cases.

On Thursday the EBA said an assessment of banks' compliance with the cap should be included in regulators' major supervisory activities this year.

The EU watchdog was setting out priorities for the colleges or panels of supervisors from EU countries for each cross-border bank that has operations in several member states. The aim is to supervise banks in a consistent way across the EU.

Since last November, the European Central Bank has become the main supervisor for the eurozone's biggest 120 banks and a core member of their colleges, along with regulators such as the Bank of England's Prudential Regulation Authority which supervises London, home to branches of many EU banks.

The steady stream of fines for misconduct, such as trying to rig currency and interest rate benchmarks, will also shape supervision this year.

The EBA said it has identified "the need for supervisors to review conduct risk and foresees monitoring and assessing improvements in corporate governance of EU banks, so as to ensure sound ethical standards".

"IT risks will also feature on the 2015 agenda, as the vulnerability of outdated systems to cybercrime and outages were found to be on the increase in the course of 2014," it said.

New, so-called "resolution" colleges will be set up this year to scrutinise the plans from banks spelling out how they would recover from a crisis or be wound up if they collapsed.

"The activities of EU colleges of supervisors in 2015... requires colleges to reach a joint decision on the assessment of recovery plans of cross-border groups," the EBA said.

If a plan is deemed to be unworkable, regulators have new powers to force the lender to make internal changes.

REUTERS