TEL AVIV, Aug 27 (Reuters) - Israel’s banking regulator on Tuesday issued a draft directive capping bank executives’ annual bonuses, in line with similar measures in the European Union and aimed at discouraging excessive risk taking.
According to the directive issued by the Bank of Israel’s supervisor of banks, executives’ variable compensation, such as annual bonuses, may not exceed their annual salary, but can be double in exceptional cases. The regulator did not elaborate on what is an exceptional case.
“This rule is intended to ensure that balance is maintained between variable and fixed compensation so that taking excessive risks is not encouraged,” the directive said.
Executives at Israeli banks often receive annual bonuses that are double, triple, or quadruple their salaries.
The regulator said he was adopting the main points of the European Directive regarding compensation at banks, the final text of which was published in June, as part of the implementation of Basel III recommendations in Europe.
Supervisor of Banks David Zaken said in a statement that the changes were aimed at bringing the Israeli banking system in line with the most up-to-date international standards.
“These standards are intended to encourage the awarding of fair compensation that will encourage excellence while preventing a situation where the incentives granted will encourage taking excessive risks and going beyond the bank’s risk appetite.”
The draft directive will be discussed with the central bank’s consultative committee on issues concerning banking business at its next meeting. It is expected to be implemented during 2014. (Reporting by Tova Cohen; Editing by Steven Scheer and Louise Heavens)