Banks in Bahrain poised to adopt new bonus rules
In another sign that the Middle East isn't escaping the regulatory crackdown on bonuses, banks in Bahrain will soon have to comply with remuneration recommendations laid out by the Basel Committee on Banking Supervision (BCBS).
In a consultation document, the Central Bank of Bahrain said that it is in the process of reviewing the documents published by the BCBS and "intends to incorporate these international standards as part of its regulatory framework".
These will be applied to licensed banks in Bahrain, which means that both regional and international organisations will come under the new principles set out in the BCBS consultative document published in October. It is open for comments until 31 December.
There 55 conventional wholesale banks licensed in Bahrain and 21 Islamic investment banks.
The important thing to emphasise is that these are recommendations rather than prescriptive rules.
However, the overall aim is to ensure remuneration is tied to risk and performance and the likes of deferrals, clawbacks, qualitative and quantitative assessment methods and a crackdown on 'golden handshakes' are all on the cards.
The BCBS recommendations are, of course, one of many regulatory proposals for curbing variable remuneration in the banking sector. But while those from the Committee of European Banking Supervisors rules - which extend to the Middle East operations of international banks - will apply to very few key staff, these will be broader.
Senior executives, those in risk and financial control functions and 'material risk-takers' - namely sales and trading staff - will all be included in the scope of application.
While this is obviously a good sign that the Middle East is increasingly complying with international governance standards, it also means that the Gulf is no longer a sanctuary for bankers looking to escape punitive remuneration policies.
