In particular, when designing compensation policies, banks should take into account a number of issues: the variable portion of the compensation of risk takers must be paid on the basis of individual, business-unit and firm-wide measures that adequately assess risk-adjusted performance; bonuses must reward the achievement of stable earnings, not simply the fruit of extraordinary operations; executives’ severance packages too must be clearly and effectively bound to the results attained, and reflect a more general evaluation of the manager’s performance; compensation must be deferred long enough to validate the true quality of management.
We, at the Bank of Mauritius, have been constantly tooling and re-tooling, equipping and reequipping and beefing up our regulatory and supervisory capacity in the past fifteen years. It’s a never-ending exercise and will never be. I understand many of you here are from regulatory authorities in the region.