The Dubai Financial Services Authority (DFSA) will not be regulating the salaries and compensations until the "foreseeable future", according to the top official from the regulator.
"I am not in favour of getting myself involved in this simply because it is a very sensitive issue," DFSA Chief Executive Paul Koster told Emirates Business on the sidelines of the DIFC Knowledge Forum yesterday. "I've never been in favour of making that the critical element of tackling the financial crisis. But it needs to be addressed and we will follow on what happens."
The G20 is currently attempting to cap bankers' and hedge fund managers' pay and regulate them for the first time. This move entails restricting compensation that rewards short-term risk-taking as in the past, investment bankers had received bonuses for taking big bets in the markets that may have led to longer-term losses.
Two recent surveys of wholesale bank executives by Oliver Wyman highlighted almost unanimous acceptance that the compensation model needs to change and consensus around the two key areas need reform. First is the allignment of payout delivery with the risk time horizon and second is the "appropriate" charging for risk taken.
Oliver Wyman, however, noted it is unlikely that there would be a legislation controlling absolute compensation levels.
Meanwhile, Koster said the DFSA will continue to "carefully scrutinise" companies that apply for authorisation to conduct financial services business in DIFC.
"We have recently changed our authorisation forms to make them more user-friendly and, while that should make some of the authorisation process easier, let me assure you it does not mean a step back in our requirements," he said.
Koster added the firm would increase the number of on-site visits to firms on an aim to understand the business of a firm by being on the ground and meeting senior management face to face.
"The days of light-touch regulation are gone, if they were ever appropriate," he said. "That is not to say the DFSA will be heavy-handed – rather we will continue to apply our resources to the risks posed by firms and their activities."
Koster said he doesn't want the firms to be afraid of the DFSA, "rather we want to be seen as a prudent regulator upholding the regulatory standards to which our firms have signed up."
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