Tuesday, December 28, 2010

Bank bonuses in global disclosure call

The Basel Committee of the world's financial regulators has revealed plans for banks to disclose their bonuses.

A consultation paper suggests banks publish details of how pay is linked to performance, as well aggregate figures for different types of remuneration.

It would include individual pay details for top managers, risk management staff and "other material risk takers".

It is hoped stock markets can then pressure banks to give employees better incentives to reduce long-term risks.
Sounding out

In its consultative document, the Committee said that it hoped the proposed requirements "will support an effective market discipline and will allow market participants to assess the quality of the compensation practices and the quality of support for the firm's strategy and risk posture".

The consultation process - which will be open to comments from all interested parties - is expected to be complete by 25 February.

The proposal comes in response to the 2008 global financial crisis, which was partly blamed on bankers taking on hidden risks at their firms in the pursuit of cash bonuses based on short-term reported profits.

The Committee also expressed concern that previous, less detailed, guidelines had been applied inconsistently by different countries, making international comparisons of bank pay policies difficult.

The new, more detailed disclosure requirements would be "qualitative" - covering details of how pay is decided and how it is linked to performance - as well as "quantitative".

However, the global regulatory body made clear that it intends to rely on market and peer pressure to moderate pay levels.

It did not go as far as its European counterpart, who set explicit limits earlier this month on the percentage of banker bonuses that can be paid upfront and in cash.

No comments:

Post a Comment