European Union tightened up Bank Lending Rules and Bonuses

Apr 17, 2013 10:55 IST

European Parliament approved new rules on bankers’ bonuses and the amount of capital that banks must hold as a buffer by a big majority. The new rules called CRD 4 (Capital Requirements Directive) will be effective from 1 January 2014. The EU plans to cap bonuses at 100% of a banker's annual salary, or 200% if shareholders approve. The objective behind the planning is to curb the sort of high-risk lending that contributed to the financial crash in 2008. CRD 4 brings the EU into line with Basel III rules on banking standards, which set new capital requirements for banks.

Under CRD 4,
• Banks will have to provide more data about their profits and taxes, on a country-by-country basis.
• CRD4 will oblige banks to increase the portion of best-quality core capital to 4.5 percent, from the present 2 percent.
• They have to hold a minimum total capital of 8% of risk-weighted assets - that is, capital held to back the loans that they make.
• The credit crunch was a liquidity crisis, so in future, banks will have to be able to meet their liabilities for a period of at least 30 days during financial stress.

Is this article important for exams ? Yes26 People Agreed
Read more Current Affairs on: European Union , Bank lending rules , Financial crisis

Latest Videos

Register to get FREE updates

    All Fields Mandatory
  • (Ex:9123456789)
  • Please Select Your Interest
  • Please specify

  • ajax-loader
  • A verifcation code has been sent to
    your mobile number

    Please enter the verification code below

This website uses cookie or similar technologies, to enhance your browsing experience and provide personalised recommendations. By continuing to use our website, you agree to our Privacy Policy and Cookie Policy. OK