Swiss regulator seeks control on bank pay

4th June 2009, Comments 0 comments

Finma wants banks to publish salary information and delay bonuses to minimise risk.

Zurich -- Switzerland's banking regulator sought the power to examine bankers' pay in proposals presented on Wednesday that aim to prevent excessive risk-taking by those seeking high bonuses.

The Swiss Financial Market Supervisory Authority (Finma) suggested in a consultation paper that banks publish their pay policies for all employees and proposed "clawback" measures to withdraw bonuses if a bank performs badly.

"Inappropriate risks and false incentives can threaten the stability and profitability of a financial institution," Finma said in a statement.

"Finma does not consider targets such as turnover, net new money, sales volumes or profits for a given period to be suitable as the sole criteria for awarding variable remuneration," it said.

The Swiss regulator said that the variable part of some employees' pay -- bonuses based on performance -- should be delayed in certain cases for "at least three years."

"Both employees at higher hierarchy levels ... and employees that can pose significant risks should receive a deferred remuneration component," it said.

But it stopped short of proposing restrictions to the amounts paid in bonuses, saying that such pay motivates staff and it "would not be sensible" to impose a complete limit.

Finma's paper came after regulators from top world financial centres in April recommended limiting bonuses if banks perform badly.

Finma said it was going further than other regulators by requiring any new rules on pay to apply to all banks, not just big ones that could affect the entire banking sector.

During the financial crisis, the collapse in the banking sector was partly blamed on bankers who took excessive investment risks to receive high bonuses.

The United States and some countries in the European Union are developing proposals to regulate the financial services industry's pay practices.

AFP / Expatica

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