Dutch banks impose limits on executive bonuses
As of 1 January, Dutch banking executives’ bonuses will not exceed their annual salaries and may have to be returned if the bank is in financial woes.The Hague – Dutch banks imposed limits on executive bonuses and salaries on Wednesday in what the finance minister said could be a model for countries facing public anger over pay ahead of a G20 summit.
According to a banking code published by the Netherlands Bankers' Association (NVB), banking executives in the Netherlands will from 1 January have bonuses limited so as to not exceed their annual salaries.
Salaries will have to be below a median figure for comparable jobs, bonuses may have to be returned if the bank runs into trouble and dismissal pay cannot be higher than a year's salary, the new code said.
Executive board members will also be prevented from exercising stock options within three years of receiving them.
Dutch Finance Minister Wouter Bos hailed the new rules as "a unique step in the world" and his office said the minister would bring the code to the G20 summit in Pittsburgh later this month as an example of what can be done.
The Netherlands is not formally a member of the Group of 20 leading developed and developing economies but has recently been invited to attend meetings.
"It is an important and good step on the road to repairing trust in the financial sector," said the minister, adding: "The code (puts) an end to bad practices at banks."
Seven European countries including the Netherlands have called for strict rules on bank bonuses ahead of the G20 summit set to discuss ways of putting the world economy to rights as it recovers from the worst slump in decades.
Britain and the United States, home to massive financial markets, oppose proposals for a mandatory bonus cap on bankers.
Many have blamed an irresponsible bonus culture for encouraging the reckless risk-taking at the heart of the global financial crisis.
The NVB said its code "puts Dutch banks ahead in the international discussions over remuneration in the financial sector."
The code was voluntarily adopted by all 90 member banks, both local and international, which will have to report on compliance in their annual reports although they face no penalties for non-adherence, it added.
Compliance will be measured by an independent committee.
The code is set to be incorporated in financial oversight legislation being amended by parliament to curb excessive bonuses.
Banking labour union De Unie welcomed the move as "better late than never”.
"Why did the banks wait so long?" while ordinary bank staff bore the brunt of the fallout, it asked.
The new code requires members to sign an ethical declaration which states, among other things, that "I will perform my duties as a banker with integrity and care".
"It is good, in times like these, that banks take such steps," Martijn Pols, a spokesman for the AFM financial services watchdog told AFP.
"It may help to improve on things that went wrong in the past."
Pols said that such rules should, however, not be limited to executives.
"People who work with clients should also not be exposed to financial incentives that could make them act to the detriment of clients."
Economist Siert Jan Vos said the banks were driven by a desire to stay one step ahead of Minister Bos, who has made it clear that he would impose bonus caps one way or another since spending billions of euros to prevent banks failing at the height of the crisis.
"I am not sure there will be many real benefits," said Vos. "It concerns such a small group of people. Thousands of other middle-managers also earn massive bonuses."
AFP / Expatica