Banks need to cut bonuses, eye risks - Dutch body

* Bonuses need to be curbed to prevent short-term focus

* Focus on clients, risks needed to restore confidence

* Stronger risk focus from non-executive board members

* Long-term shareholders should be rewarded

By Gilbert Kreijger

AMSTERDAM, April 7 (Reuters) - Banks need to curb bonuses and pay more attention to risk management to put the bank's focus on its clients and restore confidence in the financial sector, a Dutch banking committee said on Tuesday.

"In the future, we cannot have a situation anymore that profits go to shareholder and bonus payments while taxpayers, clients and employees have to bear the costs," said the committee's report, which was commissioned by lobbying group Netherlands Bankers' Association (NVB).

The committee, headed by Cees Maas, former Chief Financial Officer of Dutch bank and insurer ING (ING.AS), said that too much focus on shareholders and short-term profits had lead to more risk taking, which was one of the causes of the credit crisis and ensuing recession.

Limiting variable pay was "desirable" to shift the bank's main focus back to clients again and pay attention to long-term risks and non-financial goals, said the committee, echoing comments from financial regulatory agency FSF last week. [ID:nL2153623]

Dutch politicians, in line with their European and U.S. counterparts, have criticised bonuses over the past two months after companies such as ING, Aegon (AEGN.AS) and U.S. AIG (AIG.N) got billions in state capital and reported 2008 losses.

Bonuses for meeting financial targets should be corrected for risks and costs of capital, and should be paid out in parts, with only a third receivable in the first year, and the remainder after three years or more, the committee said.

If a bank is loss-making, executives and the later of management below the board cannot get bonuses, while annual variable pay cannot exceed an executive's fixed wage.

Total pay to bank executives should be "a bit below the median" of similar jobs in the corporate sector, and retention packages and "golden hellos" -- bonuses paid to contract an executive -- should "not be excessive", the committee said.

It proposed a stronger supervisory role for non-executive bank board members, requiring annual courses and a risk committee that shares information with a bank's external accountant.

The limited focus of some shareholders has created some "undesirable" developments, and the committee proposed that long term investors, who hold bank shares four years or longer, can earn extra rewards, such as a loyalty dividend.

Dutch bank ABN AMRO and industrial group Stork were bought and split up in 2007 and 2008 after hedge funds pressed for change at the companies.

The committee also supported regulatory measures, such as setting aside extra buffers during economic upswings, which have been proposed by a European committee and the Basel Committee, a top international banking regulatory body. [ID:nLP384492] [ID:nLU552952] (Editing by Jon Loades-Carter)