The European Commission is preparing to extend pay curbs beyond banks to insurers and tighten control of credit rating agencies, EU sources said on Tuesday.
Against a backdrop of growing frustration with sluggish progress in regulating a financial industry blamed for the crisis, the European Commission's top officials will outline plans to reinvigorate momentum for reform on Wednesday.
Michel Barnier, the EU commissioner in charge of a bank rules overhaul, will criticise shareholders for not preventing crisis and propose limiting the number of board seats managers can take to three as well as imposing a suitability test.
At a news conference with European Commission President Jose Manuel Barroso, he will also announce the EU executive's plans for further laws controlling pay in the insurance sector alongside banks, EU sources said.
So far, the Commission has issued guidelines on how bankers should be paid such as asking that earnings be staggered over a number of years to prevent big risk-taking for a windfall bonus.
But the Commission has concluded that despite its advice too many European countries failed to curb inflated bank pay. The executive for the 27-country bloc is now mulling how it can beef up the rules.
"We have put out the fire with Greece," said one European Commission official. "In the run up to the G20 meeting, Barroso wants to make clear that Europe is taking the action needed in regulating the financial markets."
Barnier will also put credit rating agencies under the watch of a new pan-European supervisor and give it the power to demand information or impose penalties.
European officials, who have grown increasingly frustrated with downgrades of states as the euro zone scrambled to mount a rescue package, hope this will tighten control of Moody's, Standard and Poor's and Fitch.
But in the wake of criticism of the sector by political leaders and talk of setting up a European agency to do the job, some fear the new regime could be used to influence ratings.
Since taking his post in February, Barnier has pledged tough action on everything from bankers' pay to demanding that lenders hoard more capital. So far, however, he has only made one concrete proposal -- to introduce a bank levy.
On Wednesday, he will present a number of reports including one that underlines the need for "further efforts" to tackle high bank pay, promising new laws to curb pay for insurers and others in financial services.
The former French foreign minister is also under pressure to produce new rules to control speculators, accused of exacerbating Greece's borrowing problems by betting on its debt. EU sources have said, however, that Barnier's proposal for a law to demand closer monitoring of the opaque derivatives market will now be delayed from July until September.
"Waiting until September gives a little more time to perfect this legislation," one Commission official said.
Sources familiar with his plans have said Barnier is examining how to give watchdogs the power to impose limits on trades in derivatives, which give investors the option to buy anything from currency to gas at a fixed price in the future.
Under a model which would closely resemble the approach being taken in Washington, traders could be stopped from building up a large position that could let them swing prices in their favour.
ReutersLast Mod: 02 Haziran 2010, 00:19