Basel regulators call for bonus transparency

International banks must make their pay structures more transparent to help prevent another financial crash, according to the Basel Committee on Banking Supervision.

The group of global regulators has published a consultation document that calls for financial institutions to bring their remuneration policies out into the open, with details of guaranteed bonuses and how executive pay is linked to performance.

Fernando Vargas, chairman of the committee's task force on remuneration, said in a statement that the draft requirements will "allow market participants to assess the quality of a bank's compensation practices and the incentives towards risk-taking they support".

Banks will be asked to publish details of the criteria used to determine bonus awards, while also disclosing the amount they pay out each year.

Speaking to Bloomberg, chief executive officer of the Centre for European Policy Studies Karel Lannoo said a requirement for banks to disclose whether bonus payments are reduced in line with performance is "probably the most important" measure in the proposals.

"Now they should explain, if the performance of a bank is not what it should be, how they would adjust remuneration," he commented.

Consultation on the proposals is set to run until February 25th 2011.