The Bill gives the FSA greater powers to regulate banks and includes the FSA's new regulations outlined in August. These aim at linking pay more closely with banks' long-term profitability and curbing the excessive risk-taking that was seen as a major contributory factor in the financial crisis.
Under the FSA regulations, due to take effect from January 2010, bonuses will not be guaranteed for more than a year and senior employees will have their bonuses spread over three years. The new bill adds to these rules by giving the FSA the power to stop excessive payments and to cancel any pay packages that appear to reward unnecessary risk-taking. There will not, however, be any cap on bonuses.
The job of analysing risks in the financial sector is likely to be carried out by a new Council for Financial Stability, consisting of officials from the Treasury, Bank of England and the FSA.
