International BusinessG-20 agrees to control bankers' bonus
Finance ministers of the world’s 20 largest economies, including India, today agreed on the need to have an “institutional cap” on bonuses paid to bankers. At the conclusion of a day-long G-20 finance ministers’ meeting here today, the nations agreed on more disclosures and transparency in the level and structure of remuneration along with global standards on pay structure, including deferral, effective clawback, relationship between fixed and variable remuneration, and guaranteed bonuses.
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Based on today’s deliberations, the Financial Stability Board (FSB) will report to the Pittsburgh Summit, which is scheduled to meet on September 24 and 25, with detailed specific proposals for developing this framework, which could be incorporated into supervisory measures and closely monitored, said a G-20 communique.
The final implementation of the cap on bonuses will, however, vest with the financial regulator in each country — in India’s case, this could be the Reserve Bank of India.
Addressing the media at the end of the meet, Alistair Maclean Darling, chair of today’s meeting and the UK"s Chancellor of the Exchequer (equivalent of a finance minister), said there was no plan to implement a cap on bonuses of individual bankers. He said from a practical viewpoint, it would be impossible to do so as bankers would ultimately find a way to reward themselves in some other way. He, therefore, said the bonus issue in banks must be tackled as a function of the risks that came with it and a “cap on the pool” must be framed in a way that did not jeopardise the future of the institutions due to reckless risk-taking by bankers. A UK-based global chairty organisation, in a statement here, said, “It is disappointing that the G-20 finance ministers put the issue of bankers’ bonuses ahead of the needs of the millions of poor people suffering as a result of the economic crisis. If the G-20 was serious about making banks work for ordinary people, they would have agreed to a global tax on currency transactins.”