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| Version 2 | Version 3 |
|---|---|
| Banks given new rules on bonuses | Banks given new rules on bonuses |
| (19 minutes later) | |
| New rules on how financial institutions should determine pay and bonuses for staff have been set out by the Financial Services Authority (FSA). | |
| It wants to see bankers' pay deals linked far more closely with the long-term profitability of the banks. | |
| The FSA says that bonuses should not be guaranteed for more than a year, and that senior employees will get bonuses spread over three years. | |
| Many believe that big bonuses led to excessive risk-taking at banks. | |
| 'Right incentives' | |
| "The FSA is determined that banks' remuneration policies should be consistent with, and promote, effective risk management," said Hector Sants, head of the FSA. | |
| The FSA said there were two main objectives behind the code of practice. | |
| First, to ensure that boards focus more closely on making sure that "the total amount [of pay and bonuses] distributed by a firm is consistent with good risk management and sustainability". | |
| And second, to ensure that overall pay, including bonuses, "provides the right incentives". | |
| To this end, eight principles have been added to the FSA's financial regulation handbook. | |
| These make clear that banks should not enter into contracts with individuals that provide guaranteed bonuses for more than one year, and that senior employees will see two-thirds of their bonuses spread over three years. | |
| Mr Sants said the new rules would take effect from January 2010. |