Central bank publishes salary ‘principles’

The Dutch central bank and financial services authority AFM have published a set of principles to govern pay policy at financial institutions.

The aim is to prevent banks and insurance companies taking ‘unnecessary risks’ with their pay structure, seen as the driving force behind the financial crisis, the organisations said in a statement.
Whether banks adhere to the principles or not will be up to their supervisory boards.
While acknowledging that bonuses can lead to traders taking too-high risks, the organisations say that is no reason to ban unlimited bonuses. ‘It is the financial institution’s own responsibility to make sure there is a good balance between the use of variable bonuses and managing the risks,’ the document states.
This is the third initiative aimed at regulating bonuses in the financial sector. In March, finance minister Wouter Bos reached a gentlemen’s agreement with the banks and insurance companies
And a committee set up by the banks themselves earlier this year took a tougher line, recommending that extra bonuses should not be greater than the employee’s annual salary.

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