FSA sends warning shot over guaranteed bonuses

by Gill Montia

Story link: FSA sends warning shot over guaranteed bonuses

UK financial firms have received a warning shot from the Financial Services Authority (FSA) over remuneration policies that guarantee bonuses for more than 12 months.

In a letter to chief executives, the regulator reasserts its determination “to align remuneration policies, procedures and practices to ensure they are consistent with and promote effective risk management”.

The FSA adds: “It is essential that the market should not revert to remuneration practices that would be incompatible with our intended outcomes if the rule and code become effective next year.”

A consultation paper published in March set out the proposals, which the Authority says are consistent with the recommendations of the Financial Stability Board and measures being hammered out across Europe and in the US.

The proposals will shortly be put to the FSA board for adoption and the regulator is therefore asking firms to supply remuneration policy statements by the end of October.

These will be checked to ensure they are compliant with proposals due to be introduced on 1st January 2010.

Furthermore, the FSA has made it clear that no allowances will be made for any remuneration packages agreed after the FSA’s consultation process began in March.