Guaranteed bonuses banned under new FSA rules

13 August 2009

The Financial Services Authority (FSA) has introduced its new code of practice designed to improve risk management in the UK.

Under the terms of the rules, two-thirds of bonuses for bankers should be spread over three years, while guaranteed rewards must not be paid for a period longer than a year.

Financial institutions that fail to adhere to changes could be susceptible to enforcement action from the FDA, or face increased capital charges.

Banks are expected to provide the FSA with a statement indicating they will comply with the code by the end of October and the new rules will take effect from January next year.

"We think that it is important to have rules in place for 2010," chief executive of the authority Hector Sants said, adding that the FSA will be the first "major financial regulator" to take steps to supervise the remuneration policies in use in the sector.

The body said last month that the penalties imposed on companies that breach market regulations could treble in size, having proposed a method that would see firms fined up to 20 per cent of their income.

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