Details Following European “trends”, American financial authorities also came out with proposals on how to restrict bonuses to top-managers. Generally, US regulators are less “aggressive” as compared to their colleagues in Europe. At least, the Fed does not want to tie bonuses to banking financial indicators.
Governments of many countries want to take premiums to bankers and financial experts under control. The Federal Reserve in not an exception and also intends to control banking premiums. However, this will be done more softly.
American regulators will amend the existing schemes if they create dangerous stimuli for employees. A set of proposals prepared by Fed was published by “The Wall Street Journal”. However, those are only “preliminary views” at the moment, and officially, it will be published two weeks later or so, as expected.
In overall, those preliminary rules don’t go as far as in Germany of France. The regulator is not imposing any restrictions on premiums neither in total amounts nor in respect to separate individuals to receive those. The Fed primarily wants to limit schemes that may potentially stimulate risky and reckless behavior by banking managers.
According to the project, about 20 largest financial institutions in the US will have to disclose descriptions of their remuneration schemes they employ to regulatory bodies, and regulators will be able to make corrections - for instance, to demand prolongation of existing schemes for several years more to see whether there will be any losses on carried out financial operations or not.
For smaller organization, the regulator will issue its separate recommendations concerning remuneration schemes.
EU
Europeans are more determined to control premiums of bankers. Last week, government chiefs of 27 EU’s countries called for new rules to be introduced to control banking premiums. The main idea they all agree upon is that bonuses should be tied to financial indicators of how successful banks are operating. There should not be any guaranteed payments. Finally, payment of yearly largest part of the bonus should be spread on a longer period – and necessarily cancelled if there are signs that the bank is starting to operate worse than before. Banks that do not meet those rules will be fined by national banking regulators. Jose Manuel Barroso already promised that even if those rules are not approved by the G20 group on the forthcoming summit (Pittsburg, September 24-25), Europe would still inplement them on its own.
Europeans have even tougher ideas on how to regulate bonuses. For instance, British prime-minister Gordon Brown said that some European leaders had discussed the possibility to set a limit on premiums as a share of revenues or profits; the possibility to control premiums of separate parties was also discussed. The USA doesn’t support the approach.
Russia
As for Russia’s positions, it was unofficially disclosed by presidential aide Arkady Dvorkovich. He said that it wasn’t reasonable to set international-type regulations in respect to bonuses. “We think there should be general principles of regulators’ policy on respect to compensation schemes of banking managers”, - said Dvorkovich. – “However, setting certain rules for the “game” is the national regulators’ business”.
He reminded that the Russian Federation had started to move in that direction after the call to control bonuses had been sounded on London’s meeting of finance ministers. “In many companies, we have supervisory boards completely rejected paying bonuses to some managers; in other firms those were just lowered. We’ll keep it that way”, - Mr. Dvorkovich promised, also noting that there would be certain rules, of course, but those would be developed gradually, step-by-step. The approach will be presented in Pittsburg.
Source: Interfax
