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Supervisor of banks Rony Hizkiyahu intends to ask banks to reexamine their remuneration policies, out of concern that bonuses based on the banks' performance could increase risky investment behavior by senior bank employees.

At most banks, the pay of chief executives and other senior personnel is comprised of a base salary, a bonus derived from the bank's targeted return on equity, and options, which are affected by share performance.

The cost of salaries and related expenditures at the banks have soared in recent years. In 2003, the annual salary cost of the five largest banks' 38,427 employees totaled NIS 10.8 billion, an average of NIS 282,000 per employee. By 2007, the last year for which official records are available, that cost had jumped to an average of NIS 328,000 for each of 44,281 bank employees - an increase of 16%. But even the 2007 figure was an improvement on the average cost per employee in 2006, which was NIS 353,000 - up 25% from the figure just three years earlier.

In the first nine months of 2008, the banks spent NIS 11.1 billion on wages and related costs. A rough extrapolation, which does not take into consideration any changes in the work force, gives an annual salary cost of NIS 14.8 billion - meaning that outlays for salary expenditures are apparently still on the rise.

A large portion of the banks' salary costs are attributable to their senior personnel. At the large banks, wage costs for top officers, which the banks are required to detail in their financial reports, reach tens of millions of shekels annually.

At Bank Hapoalim, where salary-related outlays for senior executives totaled NIS 30 million in 2007, two employees - chairman Dan Dankner and chief executive Zvi Ziv - accounted for more than half this sum, or nearly NIS 16 million. Israel Discount Bank spent a total of NIS 50 million on wages and related costs for senior managers in 2007, of which NIS 35 million was spent on chairman Shlomo Zohar and CEO Giora Offer. At Bank Leumi, chairman Eitan Raff and chief executive Galia Maor cost the bank a total of NIS 13.7 million, nearly half of the bank's total salary-related costs for its top earners.

Although not for the same reasons that have Hizkiyahu concerned, a few of the banks have already announced salary cuts for their top executives as part of their efforts to cut costs during these troubled times. Hapoalim's Zvi Ziv and Dan Dankner will each take a 10% salary cut, and the salaries of the bank's board members and other senior managers will also be trimmed. At Bank Leumi, workers have already agreed to waive half of their automatic 5% annual raise this year, even though the bank's top executives have yet to announce a similar sacrifice.