FSA tackles bankers’ bonuses in new remuneration code

by Gill Montia

Story link: FSA tackles bankers’ bonuses in new remuneration code

The Financial Services Authority (FSA) is updating its Remuneration Code to take on board the demands of the Capital Requirements Directive and the Financial Services Act 2010.

The current Code applies to the UK’s largest banks, building societies and broker dealers but the Directive will bring over 2,500 firms within its scope.

For senior banking staff, the regulator is proposing that least 40% of a bonus be deferred for at least three years, with 60% or more deferred if the bonus exceeds £500,000.

The FSA also wants at least 50% of any bonus to be paid in shares that must be retained for some time.

The proposed measures restrict the use of guaranteed bonuses and demand that banks ensure bonus payments don’t cast a shadow over the ability to strengthen capital bases.

In addition, severance payments would reflect performance over time, so that failure cannot be rewarded.

The consultation period closes on 8th October 2010 and the FSA intends to issue a policy statement in November, with new rules effective from 1st January 2011.