Bank Pay Should Be More Transparent, Basel Group Says

[Donnachaidh]

http://www.bloomberg.com/news/2010-12-27/bank-remuneration-needs-stricter-transparency-rules-basel-committee-says.html

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,” said the committee, which is seeking views on its plans until Feb. 25.

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 earlier this month imposed limits on cash payouts and the size of bonuses in the industry.

The Basel committee’s proposals will “let the markets judge” whether a bank is behaving responsibly “rather than just the supervisors,” Karel Lannoo, chief executive officer of the Centre for European Policy Studies, said in a telephone interview today.

Banks should disclose the main criteria used to decide on bonus awards, according to the Basel committee. Lenders should also release figures showing whether they are cutting planned bonuses when the person’s or the bank’s performance is weaker than expected, releasing the “number and total amount” of any reductions, the group said. Cuts on deferred payments from past bonus awards would also have to be revealed.

More at the link ---

[pinto]

1. Sounds a reasonable proposal to me.

:thumbsup:

[w4rma]

2. Very good. (nt)