The FSA today introduced new codes that will require large organisations to implement remuneration packages consistent with effective risk management. The codes aim to ensure remuneration policies are sustainable - so linked with the long-term profits of the business.
But the codes, which will come into effect in January 2010, also make it clear it is not expected that firms will enter into contracts with individuals that provide guaranteed bonuses for more than one year, and senior staff will get bonuses spread over three years.
Hector Sants, FSA chief executive, said: "The FSA is determined banks' remuneration policies should be consistent with, and promote, effective risk management. The new rules and code of practice are aimed at achieving this.
"While there is general international agreement on the need for supervisory action on remuneration policies and practices, we will be the first major financial regulator to take this step. We think it is important to have rules in place for 2012."
FSA introduces new codes to regulate bonuses in the financial sector
Banks, building societies and broker dealers will be forced to maintain remuneration packages that 'provide the right incentives', according to the Financial Services Authority (FSA).
