Moody's: Slower banker bonus payments needed to stop risk taking

Credit rating agency Moody's has claimed that bankers are receiving their bonuses too quickly and it is encouraging risk taking in the sector.

A report from the US firm puts forward that reforms which came about from the financial crisis are insufficient measures in making sure that the globe protects itself from further economic woes.

Since the financial crisis, reforms have been gently introduced to ensure that banks take longer to pay awards, with the objective being that if these rules are in place, investment bank executives are less likely to take risks.

However, Moody's' report argues that the three to five year waiting times that have been imposed in various locations are "too short to cover tail risks...such as fines and litigation", whereas seven to 10 years should cover all bases.

It also found that current pay structures that are in place are mainly beneficial to shareholders.

"Giving shareholders more leverage over compensation plans could have negative implications for bondholders if, for example, shareholders pressed companies to adopt more aggressive pay policies highly focused on earnings per share or total shareholder return metrics with only limited regard to risk," said Christian Plath, an analyst at Moody's.