EU bank re­mu­ner­a­tion needs stricter trans­parency rules

The Pak Banker - - Company& -

BASEL: Bankers' pay should be more trans­par­ent to in­vestors to pre­vent len­ders from hid­ing poli­cies that en­cour­age ir­re­spon­si­ble risk tak­ing, global reg­u­la­tors said in draft pro­pos­als.

In­ter­na­tional rules on the dis­clo­sure of pay "will al­low mar­ket par­tic­i­pants to as­sess the qual­ity of a bank's com­pen­sa­tion prac­tices and the in­cen­tives to­wards risk tak­ing they sup­port," Fer­nando Var­gas, chair­man of the Basel Com­mit­tee on Bank­ing Su­per­vi­sion's task force on re­mu­ner­a­tion, said in a state­ment pub­lished on the group's web­site to­day. The pro­pos­als will "sup­port ef­fec­tive mar­ket dis­ci­pline," the Basel com­mit­tee said.

Coun­tries are im­pos­ing rules on bankers' pay to pre­vent a re­peat of the ex­ces­sive risk tak­ing that they say con­trib­uted to the global fi­nan­cial cri­sis. Euro­pean Union reg­u­la­tors ear- lier this month im­posed lim­its on cash pay­outs and the size of bonuses in the in­dus­try.

The Basel com­mit­tee said it's seek­ing views on its pro­pos­als, which con­cern the trans­parency of len­ders' pay po­lices, un­til Feb. 25. Banks should dis­close in­for­ma­tion in­clud­ing the "pa­ram­e­ters" used to de­cide the size of bonus awards, and to de­cide the pro­por­tion of bonuses that are paid in stock rather than cash, the com­mit­tee said. Len­ders should also re­veal how they de­ter­mine what pro­por­tion of bonus pay­ments should be de­ferred, and what cri­te­ria they have for claw­ing back pay­ments that have been made.

"It's hard to see what ben­e­fits, in terms of mak­ing the fi­nan­cial sys­tem more ef­fi­cient or re­duc­ing risk, would be achieved by re­quir­ing firms to pub­lish fur­ther in­for­ma­tion" than al­ready re­quired by reg­u­la­tors, Rob McIvor, a spokesman for the As­so­ci­a­tion for Fi­nan­cial Mar­kets in Europe, said in a tele­phone in­ter­view be­fore the pub­li­ca­tion of the Basel com­mit­tee's pro­pos­als.

AFME's mem­bers will "fully" im­ple­ment rules on the pay­ment of bonuses that have been agreed by EU reg­u­la­tors, McIvor said. AFME rep­re­sents banks in­clud­ing Switzer­land's UBS AG, Deutsche Bank AG of Ger­many and France's BNP Paribas SA.

Len­ders should re­veal the "num­ber and to­tal amount of guar­an­teed bonuses paid dur­ing the fi­nan­cial year" and what ad­just­ments have been made to a bank's re­mu­ner­a­tion plans be­cause of "weak per­for­mance," the Basel com­mit­tee said. They should also re­lease in­for­ma­tion on the to­tal amount of de­ferred bonus pay­ments on the banks' books, and re­duc­tions that have been made to these awards. -PB News

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