Euro-MPs curb bank ‘bonus culture’

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.

The aim is to curb the "bonus culture" and end risk-taking in the economy.

After Friday's 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 £45.5 billion taxpayer bailout.

His massive payout for walking away – a £2.7 million lump sum and a £703,000-a-year pension – caused outrage and came to represent the worst excesses of unconditional contract terms.

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.