The Financial Services Authority (FSA) has announced proposed revisions to its Remuneration Code to extend to 2,500 financial services firms.
The revision would mean the code, which aims to tighten the rules around bankers’ pays and bonuses to discourage short-term risk-taking, will now cover most hedge funds and investment managers, as well as the top banks and building societies.
The revised code, proposed to take effect from January 2011, means employees will have to defer at least 40% of a bonus over a period of at least three years, and at least 60% when the bonus is more than £500,000.
Other changes mean that employers must not offer guaranteed bonuses of more than one year, and at least 50% of any variable remuneration components must be made in shares or other non-cash instruments of the firm.
The British Bankers’ Association (BBA) said: “The UK has moved further and faster on reform of pay and bonuses than any other country.
“Today’s proposals from the FSA represent the UKs contribution to levelling the playing field for all EU financial institutions, as they will implement the EU-wide rule changes which will come into force next January.
“The BBA maintains that reform of the bonus system in financial services must be globally coordinated.
“A global industry needs to conform to global standards, as any country which takes a lighter approach will prove to be a magnet for business.
“We now need other countries to coordinate their reforms with the UK and EU rules. We will work with the FSA to ensure rule changes do not damage the banks ability to recruit and retain staff in the UK.”
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