Half financial sector not following bonus rules

The Swedish Financial Supervisory Authority (Finansinspektionen) says that more than half the financial companies it recently reviewed are failing European rules governing systems for awarding bonuses.

The Authority studied 41 banks, credit institutions, securities and fund companies in November 2010 for its results, which show that more than half of them seem to have failings in how their bonus systems are constructed, accounted for, and paid.

Failures are generally down to the poor definitions both of who is taking on risk and who should be subject to variable remuneration, wrong payments and poor risk analysis. The Authority says the findings point to “low levels of understanding and insight in the industry overall”.

It intends to start specific investigations into each and every one of the companies identified as having deficiencies. Depending on the results the Authority may intervene more directly in the companies concerned.

The research was carried out as part of a request from the Swedish government to follow up and report on how the European Commission’s recommendations in the area of bonuses and bonus payments have been implemented, and how Swedish companies have adjusted to new rules.

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