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European Union: New Capital Banking Rules to Be Adopted

(Sept. 16, 2010) On September 13, 2010, the European Commission announced its intention to follow the new rules on higher capital standards, adopted recently by the Basel Committee on Banking Supervision, a group of regulators from 27 countries, including the United States. To meet this objective, the Commission is currently revising, for the fourth time, the 2006 Capital Requirements Directive (CRD). The third revision of the Directive was already endorsed by the European Parliament on July 7, 2010, and is expected to be approved by the Council of the EU in October 2010. Under the third revision, the CRD requires banks to adopt new policies on the structure, amount, and timing of bonus payments, in order to prevent traders from underwriting risky deals with the intent to augment their salaries. It also imposes limits on cash bonuses and requires that bonuses are partially deferred. (EU to Adopt New Basel Rules in 2011, EURACTIV (Sept. 14, 2010),

Early in 2011, the European Commission will adopt the necessary proposals in order to harmonize the CRD with the Basel Committee recommendations. Meanwhile, the recommendations are subject to endorsement by the G20 group, which will be meeting in South Korea in November 2010. (Id.)