Risk management must be integral to banks’ bonus systems, and regulators must take action against institutions whose compensation structures may fuel excessive risk-taking, said Swiss National Bank vice-chairman Philipp Hildebrand, Reuters reports.

In the wake of the credit crisis many have spoken out against compensation systems seen as having focused too much on short-term profits with little regard to the longer-term risks institutions were taking on.

"Looking back it seems obvious that compensation systems should take into account risks at all levels… But before the crisis most systems were not linked, or insufficiently linked to risk considerations," Mr Hildebrand said, according to the text of a speech given at the SNB’s Economic Outlook 2009 conference.

Although many banks have overhauled their bonus systems, in Mr Hildebrand’s view self-regulation is not enough and general standards need to be enforced.

"The standards need teeth… It is important that regulators ensure the implementation and take sanctions in cases of lacking or insufficient implementation," Mr Hildebrand is reported to have said.

At the G20 summit earlier this month global policymakers endorsed a set of sound compensation principles, drafted by the Financial Stability Board, intended to discourage excessive risk-taking by banks’ staff.

Mr Hildebrand, who headed a FSB working group on compensation, said that one of the board’s recommendations was that bonuses should be linked to risks over a longer period.

"Because risks are difficult to measure ex-ante [beforehand], bonuses should be adjusted ex-post [after the fact], when the consequences of the risks have actually occurred," he said.