Compensation regulation edges closer
Moves made by politicians around the world suggest regulation of compensation practices at financial firms is moving closer
French banks BNP Paribas and Société Générale have already promised to defer two thirds of bonus payments for three years and to pay out a third in shares, while also pledging to stop offering guaranteed payouts to new hires.
Sarkozy intends to ask the G-20 at its meeting in Pittsburgh in September to consider capping the total amount paid out by banks in bonuses and to consider setting limits on the size of individual bonuses.
Germany has already spelled out new rules on compensation that will go into effect on January 1, but more recently the chairman of the UK regulator, Adair Turner has suggested banks are earning too much money, and curbing this via a tax on transactions will be one way to ensure the bonuses are reduced. This provoked a furore in the city, which understandably fiercely opposed his proposal. The UK government has also denied it is considering a tax on transactions. While Angela Knight, chief executive of the British Bankers' Association, also defended the financial industry's role in the economy, saying the sector was a main provider of jobs and tax revenues and could be undermined by the wrong kind of taxes or regulation.
Moves in Europe to curb compensation will be of keen interest to president Obama and his newly appointed pay czar Kenneth Feinberg, who has been tasked with establishing pay guidelines for executives at the rescued companies. It is as yet uncertain whether the terms he decides upon will be made public over fears by bankers that highly remunerated individuals will be targeted by populist anger.
"There is a tension between not wanting to put on the front page of every newspaper in the country the specific compensation packages of these individuals ... versus the public's right to know," said Feinberg in a statement on August 16.
The Treasury Department has indicated it will not make public information that would identify individual employees, but suggested it will publish final determinations on pay packages in compliance with the Privacy Act.
Reuters has submitted a request under freedom-of-information laws to review the pay proposals submitted by the seven companies. The Treasury has yet to respond.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Banks fret over vendor contracts as Dora deadline looms
Thousands of vendor contracts will need repapering to comply with EU’s new digital resilience rules
EU banks lose relief on model test after FRTB delay
Deferment of new trading book regime to January 2025 eats into transition period for “erratic” P&L attribution test
Sunday night football and the Basel III endgame
Big banks, political advocates and housing organisations are unlikely allies in race to dropkick new capital regime
Futures exchanges seek clarity on China licensing regime
Hazy details on landmark Futures and Derivatives Law breeds legal uncertainty, unnerving operators
Some EU banks wanted option to start FRTB on time
Representatives of member states raised possibility with European Commission at July meeting discussing the delay
For US Treasury troubles, treat the cause not the symptom
Regulatory alarm about hidden risk in the Treasury futures market misses the point, fund association execs write
Iosco delays pre-hedging consultation to November
Review into controversial practice splits industry
Honey, I shrunk the Fed. (Not a sci-fi fantasy)
Promoting the discount window may be the Fed’s key to shrinking its $7trn balance sheet, says Bill Nelson