Supervisor of Banks David Zaken on Tuesday announced new rules to limit
executive compensation in banks, which will bring Israel in line with the Basel
III requirements set to hit Europe in 2014.
The new rules will limit
bonuses to be no greater than actual salaries, with “exceptional cases” allowing
a double bonus. Many financial executives earn the bulk of their salaries from
hefty bonuses that far outweigh their official annual pay.
The rules also
ban compensation defined solely around completing a certain period of work, such
as retention bonuses intended to keep employees on board for certain time,
unless they are also linked to performance.
“These changes are intended
to bring the method of compensation in the Israeli banking system in line with
the most up-to-date international standards,” Zaken said. “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
Finance Minister Yair Lapid on Sunday used Facebook to speak
out against bloated bank bonuses. In an upcoming Bank Leumi meeting, he wrote,
shareholders “will be asked to approve for the 15 most senior employees of the
ban, including the CEO and chairman of the board, salaries and bonuses of tens
of millions of shekels. Normally, I firmly oppose any attempts to persecute the
business sector. On the other hand, this is too much.”
In times when most
Israelis are struggling to get by, Lapid wrote, bankers could not “continue
operating as though the party is still going.”
The state holds 6 percent
of Bank Leumi’s shares, which means Lapid may be able to influence the vote.
Stay on top of the news - get the Jerusalem Post headlines direct to your inbox!