Business Irish

Sunday 19 November 2017

Regulator seeking pay policy details in drive to curb excessive risk

Joe Brennan

THE Financial Regulator has sent out a detailed questionnaire to the country's financial institutions as it presses ahead with plans to publish pay policy proposals for the sector.

"The EU has published recommendations on remuneration policies in the financial sector and, in line with this, we are in the process of developing a policy for the Irish financial services industry," a spokesperson said.

The regulator wrote to banks, insurance firms and larger financial firms and their representative bodies before Christmas seeking their views on a series of issues.

Among a series of 27 questions, institutions are being asked about how their remuneration calculations take account of liquidity risk, cost of capital and the long-term sustainability of the firm. Financial companies have also been asked to provide the regulator with copies of their remuneration committees' terms of reference and documented pay policy.

Institutions must also say whether they have identified all staff whose jobs "have a material impact on the risk profile" of the business.

Other questions include whether companies' remuneration committees review the pay of individuals engaged in audit, compliance and risk management, and whether staff performance is "set in multi-year framework".

While the Government has slapped a pay ceiling of €500,000 on chief executives of the country's state-guaranteed lenders, the regulator is looking to establish long-term policy guidelines for the broader financial sector, in line with a broader EU drive.

The EU guidelines, launched last April by EU Commissioner Charlie McCreevey, aim to ensure that financial institutions have remuneration policies that promote sound and effective risk management.

At the time, Mr McCreevey said: "Up until now, there have been far too many perverse incentives in place in the financial services industry.

"It is neither sensible nor sane that pay incentives encourage excessive risk-taking for short-term gain."

Irish Independent

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