New Limits on Bankers' Pay and Bonuses

As part of new rules determining how banks should pay and reward staff the Financial Services Authority (FSA) has introduced several new principles to its financial regulation handbook. These provisions will take effect from January 2010 and provide that, among other things, bonuses should only be guaranteed for 12 months; and senior employees will see two-thirds of their bonuses paid out over three years.

However, the FSA has reduced the number of banks affected by the rules from 47 to 26.  Hector Sants, chief executive of the FSA, said the regulator was "determined that banks' remuneration policies should be consistent with, and promote, effective risk management".

All banks covered by the rules now have until the end of October to submit their remuneration policies to the FSA for approval.  Banks that do not comply with the rules could face enforcement action or be forced to hold more cash in reserve.

NICK BARNETT

Published on 28/08/2009