According to the regulator, building societies, brokers and the larger banks are already included in the legislation, drawn up to curb the excessive bonus culture prevalent within the financial services industry before the global credit crash.
However, under the terms of the Capital Requirements Directive (CRD 3), a total of 2,500 firms could be covered by the regulation if the latest proposals from the FSA become law.
The rules, which currently cover 27 organisations, will apply to a variety of firms including those within the venture and corporate capital sectors as well as hedge funds, asset managers and UCIT investment firms.
In a statement, the FSA said: “Successful implementation has resulted in more demanding standards in a number of areas and has shifted the composition of remuneration structures to forms more consistent with effective risk management.
“More generally, the FSA has seen stronger and more independent remuneration committees and greater recognition of the need to consider risk when setting remuneration policies and signing off bonus policies.”
The current rules insist that firms within the sector use “remuneration policies, practices and procedures that are consistent with and promote effective risk management”.
According to the regulator, the consultation period for the changes will finish on October 8th before the legislation becomes effective on January 1st 2011.
By Jim Ottewill