FSA waters down planned rules on banking bonuses
THE Financial Services Authority (FSA) has watered down plans to regulate how bankers receive their bonuses due to fears that firms could move abroad to avoid the rules.
The City watchdog had considered recommending that two thirds of each bonus should be deferred and individual rewards be governed by the firm’s overall performance.
But the FSA’s final remuneration code, to be released today, has backed away from those pay rules because they would not be enforced in the European Union and the US.
“Such an approach cannot work if it is only applied in the UK,” the FSA admits.
The regulator insists it still wants companies to discourage short-term risk taking by bankers who are trying to up their bonuses.
“The FSA’s new guidelines are designed to ensure that boards prevent management from introducing compensation policies that, in effect, subordinate the interests of capital providers to those of employees,” FSA chief executive Hector Sants told the Financial Times.