Bankers can complain to FSB about rivals’ bonuses

Bankers will be able to report each other to the Financial Stability Board, a regulator of the financial sector created by the G20, in case they have solid evidence of violation of rules concerning the granting of bonuses, writes Reuters. Bankers’ bonuses have outraged public opinion in the United States and Europe, while the household income declined due to economic problems. Leaders of the 20 largest economies, joined together in G20, agreed in 2009 to limit bankers’ bonuses and decided that Financial Stability Board (FSB) will supervise the application of the rules.

Practices of financial institutions on the benefits paid to executives have made a major contribution to the global financial crisis, states a statement of the institution, which has established an office – Bilateral Complaint Handling Process (BCHP) for processing complaints against banks that do not follow G20 rules. “Differences between bonus levels should not be considered evidence of a malpractice itself,” according to the Board, which notes that the complainant banks must provide detailed evidence on the misapplication of the rules.

G20 regulations limit bonuses paid in cash; it also states that share benefits should be granted over several years. If the performance achieved by the bankers will be unrealistic, there is a mechanism in place to recover the bonuses. Banking industry officials were reluctant to comment on the initiative of the Financial Stability Board. Over 25% of Credit Suisse and Barclays shareholders recently voted against the remuneration packages of heads of the two banks.

Evidence of unfair practices of banks, however, is difficult to get, said Paul Fontes, director of law firm Eversheds in London. He gave the example of a bank trying to hire a team of employees from a rival bank, offering to guarantee bonuses for a year, according to the rules G20. Eventually, another bank was successful, providing guaranteed bonuses for three years. Regulatory authority could not interfere in the absence of concrete evidence, such as a written offer.