FINANCIAL SERVICES
Government launches consultation to improve bank bonus transparency
The government has launched a consultation that will “help tackle unacceptable bank bonuses by improving pay transparency at large banks”, Mark Hoban, Financial Secretary to the Treasury, has announced today.
The proposals would require the eight highest-paid non-board executives to disclose their remuneration arrangements. HM Treasury says: “Improving transparency for senior executives who manage risk will help provide shareholders with more tools to hold senior management to account.”
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Although banks will not be required to publish the name or title of the recipient, disclosure must include the pay of each individual, split up into fixed, variable, deferred variable, long-term incentive scheme vestings, pension accruals, joining benefits and severance benefits.
The disclosures will not include executives on the main board of a UK bank, as their remuneration agreements must already be disclosed.
These proposals would apply to banks with assets in excess of £50 billion. As such, the exact number of banks covered will be known at the end of this financial year. But as things stand, these proposals cover around 15 banks, including the largest UK banks and the UK banking operations of large foreign banks. Disclosures will not be required from banks from the European Economic Area, as these banks are subject to the rules of their home regulators.
HM Treasury says: “Today’s consultation forms part of the government’s ongoing commitment to introducing the most comprehensive disclosure regime of any major financial centre, and follows a number of significant steps that have already been taken to reduce excessive risk-taking and improve corporate governance.”
Background
In February 2011, the government announced an accord with major UK banks under the name “Project Merlin”. As part of this agreement, the government indicated that it would consult on a mandatory requirement, from 2012, for large banks to publish the pay of their eight highest paid senior executive officers.
It also builds on a commitment by the four major UK banks to make detailed remuneration disclosures with respect to the five highest paid non-board executives within their organisations.
The first disclosures will be due in 2012, covering the 2011 year.
Purpose of consultation
The consultation paper says: “The aim of this consultation is to seek views on a mandatory requirement, from 2012, for large UK banks to publish the pay details of their eight highest paid senior executive officers.”
A final word
"The banking system cannot reward employees for short-term performance while leaving investors exposed to long-term risk. We want shareholders to hold banks to account for their bonus structure, which is why we’re taking action to make top-level pay more transparent. We want the most transparency for those with the greatest responsibility.” - Mark Hoban, Financial Secretary to the Treasury.
Want to know more?
The consultation can be found here: www.hm-treasury.gov.uk/consult_merlin_remuneration_disclosure.htm.
Closing date for responses: 14 February 2012.