Banks fail to peg bonuses to performance: G20 body

Wed Jun 13, 2012 5:44pm EDT
 
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By Huw Jones

LONDON (Reuters) - Banks are failing to comply with global rules requiring them to peg bonuses to long-term company performance, the regulatory task force of the Group of 20 leading economies said on Wednesday.

The G20 approved principles in the aftermath of the 2007-09 financial crisis to stop bonuses from encouraging excessive risk taking.

They force banks to limit how much of a bonus can be paid up front in cash, with the rest deferred and paid in shares that can only be sold over time.

In a report for a summit of G20 leaders next week, the Financial Stability Board said implementation was improving but some areas needed tightening up, in particular matching bonuses to performance.

"The alignment of compensation with performance is highlighted as a continuing challenge for institutions, since they do not want to lose key personnel and struggle to align compensation payouts with the financial performance of the company," the FSB said.

Bank shares have been hammered in recent years as some investors shun a sector facing uncertainties from the euro zone debt crisis and falling profitability as new regulation bites.

There is widespread public anger in Europe and the United States at high levels of pay for top bankers at a time when a number of institutions survive only due to state aid after over-extending themselves with rash investments.

Top shareholders have also put pressure on banks like Barclays (BARC.L: Quote) to trim pay packages.   Continued...