Updated draft directive on remuneration policy at banking corporations
The Supervisor of Banks today announced that he is adopting the main points of the European Directive regarding remuneration at banks, the final text of which was published at the end of June 2013 as part of the implementation of the Basel III recommendations in Europe (Directive 2013/36/EU- Capital Requirements Directive), and the implementation of which in Europe will begin on January 1, 2014.
As such, the Supervisor of Banks has published an updated draft of Proper Conduct of Banking Business Directive (draft directive) regarding remuneration policy at banking corporations, the initial text of which was published in Hebrew on the Bank of Israel’s website on June 3, 2013. The previous announcement can be found at:
The guidelines in the draft are in line with the development among regulatory authorities around the world, which has gained strength following the global financial crisis, and which holds that remuneration is an important element of risk management and proper corporate governance at financial institutions. These guidelines are intended to strengthen the control mechanisms and ensure that remuneration arrangements are consistent with the long-term goals of the financial institution.
The following are included in the updated draft directive:
Supervisor of Banks David Zaken: “These changes are intended to bring the method of remuneration in the Israeli banking system in line with the most up-to-date international standards. These standards are intended to encourage the awarding of fair remuneration 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 Consultative Committee on issues concerning banking business at its next meeting.
The Banking Supervision Department is acting in conjunction with the Ministry of Justice in order to ensure that the banking corporations will be able to prepare for the implementation of the draft directive as soon as possible, once the directive becomes binding, along with the implementation of the requirements of the Companies Law (Amendment 20), 5773-2012.