NEW YORK (
) -- Banks may be forced to tie risk-taking and lending practices to executive pay if new rules are adopted by international regulators.
The rules, proposed by the Basel Committee on Banking Supervision on Monday, could impact large U.S.-based banks such as
Bank of America
that have operations that fall under the international regulator's purview.
Under the proposals, banks would disclose how they determine the size of bonuses and how those bonuses are paid -- either in stock or cash. Additionally, bank boards would need to tie compensation to the type and amount of "risk taking" by management and rely on so-called "deferred compensation" schemes that only allow payouts based on long-term performance.
The proposals "will allow market participants to assess the quality of a bank's compensation practices and the incentives towards risk taking they support," said Fernando Vargas, chairman of the Basel Committee's compensation task force and associate director general for banking supervision at the Bank of Spain. "
These requirements should also contribute to promote greater convergence and consistency of disclosure on remuneration."
How bankers are paid has become a
over the past several weeks as banks prepare themselves for handing out year-end bonuses.
on the Basel committee's web site until Feb. 25.