German bank regulator to probe pay awards at German banks: paper FRANKFURT (Reuters) - German regulator BaFin will scrutinise pay policies at two dozen top banks because of doubts over whether lenders are correctly implementing stricter bonus rules, Frankfurter Allgemeine Sonntagszeitung said. Systemically relevant banks and staff who have been identified as "high level risk takers" including at Deutsche Bank (DBKGn.DE) are of particular interest, the paper said, citing a BaFin source. Around 23 banks with a balance sheet size greater than 10 billion euros, and complex or international operations are expected to be the main focus for regulators, the paper said. "It is important to inspect how banks are implementing the new rules for remuneration," Raimund Roeseler, Chief Executive of Banking Supervision at BaFin, told the paper. Bank regulators are expected to conduct special probes of lenders' policies by sending in independent auditors to go over the books as full-year earnings reports are finalised, the paper said. In previous years Deutsche Bank awarded a special "division incentive" for management board members with responsibility for the corporate and investment bank. Germany changed bonus rules in October 2010, demanding that pay was appropriate, transparent, and aligned to ensure sustainability. Systemically important banks need to identify key personnel whose activities are particularly risky, or whose department or contribution is particularly important for the institution. In September, Deutsche Bank co-Chief Executive Anshu Jain, previously the head of investment banking, warned that the payout ratio - the proportion of net revenues set aside for banker pay - would come down. By the third quarter, Deutsche Bank's variable compensation as a percentage of net revenues had come down to 11 percent. Separately, Deutsche Bank is set to cut variable pay for investment banking staff by between 15 and 20 percent, German weekly Der Spiegel said, citing sources close to the bank. Deutsche Bank declined to comment on the Der Spiegel report on Sunday. Deutsche Bank has already reformed the way it awards pay. For investment bankers, bonuses are determined on the basis of the bank's overall earnings performance. The bank uses its pretax return on equity and the actual return on equity level over a two-year period as a benchmark for determining pay. At least 60 percent of total variable compensation is granted on a deferred basis, and no more than 20 percent is paid out in cash immediately. Deutsche Bank has also forced senior managers to wait five years, rather than three, to receive bonus share awards as a way to encourage longer term sustainable performance. Reporting By Edward Taylor; Editing by Helen Massy-Beresford