Financial Regulatory Forum

UK regulator steps back from pay rules for banks -FT

August 12, 2009

fsa_logo    LONDON, Aug 12 (Reuters) – UK financial regulator the Financial Services Authority (FSA) has backed away from specific recommendations on how bankers’ bonuses should be structured for fear of undermining Britain’s international competitiveness, the Financial Times reported on Wednesday.
   Citing “people familiar with the matter,” the FT said the FSA’s remuneration code — due to be unveiled on Wednesday — would focus on requiring bank boards and management to link pay more closely to risk.
   This represents a step back from a draft version of the code drawn up in March, which included specific recommendations that two-thirds of each bonus should be deferred and that bonuses should take into account the overall performance of a firm rather than just the individual or division, the FT said.
   In the same issue of the FT, Hector Sants, the FSA’s chief executive, wrote a commentary in which he said the new guidelines were “designed to ensure that boards prevent management from introducing compensation policies that, in effect, subordinate the interests of capital providers to those of employees.”
   Sants does not directly address the issue of whether the code has been watered down.
   Under the headline “Pay what you like, but within your means,” Sants wrote that the FSA had ensured its code was “in line with the current international thinking” and said the approach would not work if it were only applied in the UK.
   The FSA intends to “rigorously police this code,” Sants wrote, adding: “Those who fail to comply will be required to hold more capital, which in turn will decrease profitability and thus the pool available for distribution.” (Reporting by Kate Kelland. Editing by Carol Bishopric)
 ((kate.kelland@thomsonreuters.com; London Newsroom +44 (0)207 542 7947))
Keywords: BRITAIN BANKS/FSA
  
Wednesday, 12 August 2009 01:34:14RTRS [nLB514696 ] {C}ENDS

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