Basel Committee unveils new disclosure norms for banks

Geneva: The Basel Committee on Banking Supervision, which is overseeing global reforms in the sector, unveiled new guidelines that would require lenders to publish all details on their pay policies, particularly bonuses and performance incentives.

In the wake of global outcry against 'obscene' salaries and bonuses received by leading bankers, who caused the global financial crisis in 2008, the Committee has stipulated stringent capital adequacy requirements.

It has come down heavily on the salary benefits that fuelled bankers to take such huge risks that eventually led to global economic meltdown.

"These disclosure requirements, developed in consultation with the Financial Stability Board, will support effective market discipline by allowing market participants to assess the quality of a bank¿s compensation practices and the incentives towards risk taking they support," the Basel Committee said, while issuing new details.

"The Committee's Pillar 3 disclosure requirements add greater detail to the guidance on this topic that was included in the supplemental Pillar 2 guidance issued by the Committee in July 2009, it said, arguing that the proposals "cover the main components of sound remuneration practices".

Effectively, the new rules would force banks to provide timely information, including the names of people overseeing remuneration policies. Besides, the Banks will have to publish details on their employees overseeing risk-taking assignments in critical areas.

In a separate development, the Committee issued two papers on operational risk-Principles for the Sound Managementof Operational Risk and Supervisory Guidelines for the Advance Measurement Approaches.

They set out "the principles based on best industry practice and supervisory experience and cover three overarching themes: governance, risk management and disclosure" and "the regulatory capital adequacy framework."

Source: Financial Express