- Cap CEO salaries and allowances to below 5% percent of employees´ pay bill or 0.025% of total assets, whichever is less ( See the Graphs above and crunch some number to figure out,who is making how much money) (number ON GRAPH IN 000) .
- Vehicle to CEO must not exceed 50% of annual salary and allowances
- Cap not applicable to banks in trouble, branches of foreign banks, banks having govt.
Reading the headline “Central bank caps CEO perks and benefits” in this news paper ,forced me to revisit an op-ed written in 2009 by Paul Krugman, Noble Laureate in Economics. The op-ed was titled “Making Banking Boring”. In the piece Professor Krugman argues stronger regulation and salary cap in the financial industry could have prevented the ongoing great global financial debacle. He further adds caping compensation will force nation’s best and brightest people to leave the financial sector and join other sector of the economy.
Despite agreeing with Professor Krugman and also endorsing the move of the capping the salary , I strongly believe that it is not the role of the Central bank to cap the executive pay. If not the invisible hand (market forces), capping should have been left on the hands of Ministry of Finance. Instead of wasting time on unrelated issues, our very bright monetary economist and his team should utilize their intellectual capital on addressing domestic and international monetary issues. At the national level lots need to be done for the democratization of access to finance and taming down inflation. In the international front ,the central bank need to worry about how to prepare the Financial Institutions of Nepal to align their capital in accordance to the recently pass Basel III. Much talked about overvalue of the Nepali currency is still needed to be address. I can’t resist asking myself few questions. Did Rastra Bank independently decided to make banking boring to the few or was it because of the loan received from International Monterey Fund -Rapid Credit Facility ? Is “Washington Consensus” really dead??
1 comment:
Why Ministry of Finance? What makes them better than the Central Bank? More importantly, what makes both these bodies better than the banks' own board who are acting on its own self interest?
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