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31 May 2011
Bankers face steep fines under new EU rules - document
Source: Yahoo! UK &Ireland Finance
John O'Donnell, Tuesday 31 May 2011
BRUSSELS (Reuters) - Bankers could face fines above 5 million euros (4 million pounds) for rule-breaking under EU plans that would bring other European countries into line with Britain's tougher regime on regulating banks.
A draft law promises a stricter code of penalties not just for banks, but also for individual bankers, if they hide information from regulators or break rules capping the amount of cash paid in a bonus.
It would set the bar higher for fines in Europe (Chicago Options: ^REURTRUSD - news) and add to momentum for increased penalties in countries that were lax in regulating banks before the financial crisis, such as Ireland (Berlin: IIK.BE - news) , as well the region's biggest economic power, Germany.
In one of the most far-reaching reforms since bonus curbs were imposed on European bankers, officials working for the EU's top regulatory official, Michel Barnier, have outlined plans for standardising such fines, in a document seen by Reuters.
They describe a new EU code that would allow EU countries to fine individual bankers up to 5 million euros or 10 percent of their pay and bonus -- whichever is higher.
The document also proposes powers for national authorities to penalise banks by up to 10 percent of turnover.
The rules, if made law, would far outstrip the powers of regulators in Ireland, who cannot impose a fine of more than 500,000 euros on individuals, and even Germany, where the maximum penalty on an institution is 1 million euros.
The Financial Services Authority, however, is already able to impose unlimited penalties on banks or their employees and last year fined JP Morgan 33 million pounds for failing to separate clients' money from its own.
It has also fined two managers at Northern Rock for playing down the extent of the lender's problems, although the 504,000 pounds penalty given to former deputy Chief Executive David Baker was only a fraction of what is proposed in rules from the EU executive or Commission.
Officials hope EU sanctions would give extra bite to reforms to control finance as well as discourage banks from relocating to countries with softer rules, as Germany's Depfa did with a move to Dublin before later needing a state bailout to avoid collapse.
The draft law will now go to EU member states and the European Parliament for approval before it could become law across the bloc's 27 states.
"A manager of a bank could be sanctioned when he is responsible for a violation, for instance, in case he deliberately decided not to report disadvantageous financial information to supervisors," said one official with knowledge of the proposal.
"In most cases sanctions will be imposed also on the bank."
(Editing by Rex Merrifield and David Cowell)
