Bern, Switzerland (GenevaLunch) – The Swiss Financial Market Supervisory Authority (Finma) says it wants banks’ remuneration policies to be more closely aligned with the long-term health of the institution. They should not be an incentive to take risks which may undermine the company. But it will not cap bonuses. Finma announced its new circular Wednesday 11 November. The new regulations take effect 1 January 2010.

Finma says that variable remuneration, or bonuses, should reflect an employee’s stake in the success of the company, in the company’s overall performance,  and should reflect the risks the company takes. Finma encourages senior employees’ bonuses to be deferred in order to ensure that the company’s health is aligned with their remuneration.

The “best practise” recommendations are required for the country’s seven biggest banks and five biggest insurance companies, all of which have a capital base of more than CHF2 billion (banks) or, in the case of insurance companies, solvency requirements in that amount. They are strongly suggested for all others, and any institution that is judged to be violating the circular’s recommendations can be obliged to comply by Finma. The rules hold for any institution foreign or domestic that is under Finma’s supervision. All banks will need to publish their remuneration policy yearly.

The payment of bonuses has been a contentious issue in the USA and in many European countries in the wake of the world financial melt-down late 2008, with financial institutions arguing that they need to be able to pay high bonuses to attract top employees, and governments balking at allowing bonuses to be paid when public money has been spent to rescue many financial insitutions.

Links to other sites: Finma, Le Temps, Reuters, Straits Times

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