Brussels, 11/10/2010 (Agence Europe) - The Committee of European Bank Supervisors (CEBS) has submitted guidelines on pay and bonuses in banking to a public consultation that will run until Monday 8 November 2010. The guidelines will help national supervisors apply the new EU directive setting upper limits on bank bonuses as a proportion of traders' salary (see related article above). A public hearing will be held in the CEBS headquarters in London on Friday 29 October.
The CEBS does not suggest a one-size-fits-all upper limit for bonuses in the European Union: 'Because situations vary enormously, it is not possible to decree one optimal relationship between the fixed and variable components of remuneration... Institutions must apply the same chosen ratio between instruments and cash for their total variable remuneration to both the upfront and deferred part.' Each body should decide for its own staff and explain the ratios decided upon along with the impact of potential trading losses on the ratio. Factors that could be used to decide on a bonus in relation to fixed salary are the level of performance, duration of the deferment of bonus, the nature of the business and risks involved, category of staff and the institution's legal structure.
The CEBS believes that banks should apply the same ratio (50%) for cash and share options whether the bonus is paid immediately or deferred for between three and five years. (M.B. trans fl)