Banks 'should vary bonus policies'

12 May 2011

Banks should end their one-size-fits-all bonus award practice, it has been claimed.

The Basel Committee on Banking Supervision said that lenders need to vary their policies depending on the risk-taking levels different employees adopt, Bloomberg reports.

In a report, the organisation noted remuneration is not always based on the riskier routes some may be taking more than others, as banks often follow the same policy with regards to deferring bonus payouts and judging when staff can cash in stock options.

The committee stated: "Standardizing the features in ways that do not depend on risk calls into question whether firms are really paying attention to risk-incentive alignment."

An overhaul of the bonus policies banks follow has been sought by regulators ever since the financial crisis in order to stop traders from taking risks that are too dangerous, the news agency added.

The anti-austerity action group UK Uncut recently announced it is planning on staging demonstrations in a number of UK branches in protest that the government is making National Health Service cuts and not addressing banker bonuses.

By Claire Archer

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