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.
Unnecessary bonuses saved
Zurich, Switzerland (GenevaLunch) - UBS has announced changes in its pay policy in an internal memo seen by Reuters. Fixed pay will become a more substantial portion of the total pay package, where previously “the ratio of variable to fixed compensation was in some cases particularly high”, the memo says. The total compensation package will still be in line with market standards, UBS says in the memo to its employees, communicated 5 October.
UBS pays its senior employees in shares or options. These will be frozen for three years before the employee can actually trade them. UBS will only start to pay bonuses when it is profitable again.
Nine US banks paid their employees bonuses that exceeded the banks’ net income in some cases, a report by New York Attorney General Andrew Cuomo details. The banks all received government aid in 2008. The report says banks’ compensation policy “has become unmoored from their financial performance”. Cuomo writes that “when the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well.” The nine banks received $125 billion in bailout money under the Troubled Asset Relief Program (TARP). Most of the banks have paid the money back. NYT, Reuters
