UPDATE: UK Government Says International Banks Agree On Tougher Bonus Rules
October 14 2009 - 12:10PM
Dow Jones News
The U.K. government said Wednesday that 11 international banks
have agreed to immediately adopt new rules on bonuses set by the
country's financial regulator, two weeks after their U.K. peers
agreed on the same principles.
Under the agreement, the banks will apply the new remuneration
rules paid out based on their performances in 2009.
The banks are Citigroup Inc. (C) and Goldman Sachs Group Inc.
(GS), JPMorgan Chase & Co. (JPM), Deutsche Bank AG (DB), Nomura
Holdings Inc. (NMR), UBS AG (UBS), Morgan Stanley (MS), Bank of
America-Merrill Lynch (BAC), BNP Paribas SA (BNP.FR), Credit Suisse
Group AG (CS) and Societe Generale SA (GLE.FR).
In a statement, the U.K. Treasury said German Deutsche Bank and
French BNP Paribas and Societe Generale, which are within the
European Union and have major London branches, will implement the
G20 agreement "in accordance with their home regulator" and would
seek to "voluntarily" comply with the U.K. rules for their
employees based there.
The code set by U.K.'s regulator, the FSA, comes into effect
Jan. 1 and is broadly inline with remuneration reforms set out at
the Group of 20 leaders summit last month. The reforms include
allowing a cut in bonus payouts for poor performance and having
part of the compensation deferred over three years for some
executives.
Many of the banks say privately that their pay practices are
already in line with the guidelines.
Remuneration practices, especially in the U.K. and the U.S.,
have come under intense scrutiny since the financial crisis shook
the banking sector and economies around the world. With many banks
being bailed out by their governments, taxpayers and investors say
executives shouldn't receive the big compensation packages common
in the industry.
The U.K. government has been the first to implement the G20
rules. Last month, it said its five largest banks - Barclays PLC
(BCS), Standard Chartered PLC (STAN.LN), Lloyds Banking Group PLC
(LYG), Royal Bank of Scotland Group PLC (RBS) and HSBC Holdings PLC
(HBC) - agreed to follow the reforms, also in relation to bonuses
paid out based on performances in 2009.
"We welcome the global nature of the G20 remuneration reforms
and will work with the FSA and regulators in our home countries in
adopting the reforms, recognizing that all G20 nations have also
committed to their implementation to ensure a level playing field,"
the international banks said in a statement Wednesday.
Analysts say there is a risk that other countries, including the
U.S., could implement slightly softer rules, still under the same
G20 reforms, which would leave the U.K. at disadvantage.
The Wall Street Journal reported Wednesday that major U.S. banks
and securities firms are on pace to pay their employees around $140
billion this year, more than they received in the booming year of
2007.
-By Patricia Kowsmann, Dow Jones Newswires. Tel
+44(0)207-842-9295, patricia.kowsmann@dowjones.com
(Margot Patrick and Laurence Norman contributed to this
item.)