Monday, October 17, 2011

European watchdog urges banks to improve pay disclosure

Not a single major European bank is providing enough transparency and detail on staff pay, and disclosure needs to improve, Europe's banking watchdog said today.

"With regard to the new disclosures on remuneration policy and practices, there is room for significant improvements for the majority of banks included in the sample," the European Banking Authority said in a report on banks' transparency.

They also need to better show the link between pay practices and risk, the EBA said.

The EBA said a quarter of the 20 banks in the sample provided "insufficient" information on remuneration and a further 50 percent could improve their disclosure. The remaining five banks had not published their data when the EBA carried out its assessment.

Banks need to provide more aggregate quantitative information on pay, broken down by senior management and staff whose actions have a material impact on risk, and should also provide a breakdown by business area, the EBA said.

The need for banks to provide more details on pay for 2010 was a new requirement so it was not surprising that disclosure could be improved, it said.

The findings were part of a report on banks' transparency and discipline on a range of issues, known as Pillar 3 disclosures, which aim to encourage banks to provide high-quality and consistent information about their finances.

The EBA said there had been an improvement in most areas, but some criticisms remained valid and disclosures on counterparty credit risk and interest rate risk should be improved.
The sample included most top banks, such as HSBC, Santander, Barclays, UBS Deutsche Bank and BNP Paribas.