The Circular will have a direct impact on the remuneration systems of the financial institutions concerned. The Circular will aim to ensure that remuneration systems do not provide incentives to take inappropriate risks that could threaten the sta-bility of financial institutions. As a result, financial institutions will have to structure their variable remuneration packages (bonuses) on a sustainable and long-term basis in line with economic profit while taking into account the costs related to all risks entered into. Furthermore, Boards of Directors will have to discharge their duties “more carefully”. They are responsible for the remuneration policy of the entire company and will have to disclose the remuneration policy in a remuneration report.
The Circular will apply to all finanical institutions supervised by FINMA.
FINMA is inviting submissions which must be received by 14 August 2009. It plans to set out the definitive provisions in September 2009, with the Circular entering into force as of 1 January 2010. This will give financial institutions a transitional period during which they can bring their remuneration systems into line with the new requirements. FINMA expects the remuneration systems of all financial institutions concerned to comply with the principles set out in the Circular from 1 January 2011 onwards.