09 December 2009

FSA feedback statement on remuneration – limited application of Code to large banks, building societies and broker dealers

The Statement on Reforming Remuneration Practices in Financial Services explains how and why the FSA has decided not to extend the Remuneration Code to other FSA-authorized firms. However, the FSA lays out plans for further intervention in that area.

The FSA’s remuneration code comes into force for large banks, building societies and broker dealers on 1 January 2010.  It will apply to any remuneration awards made by these firms for the 2009 performance year.

Chapter 6 of the March consultation paper invited general discussion on whether the code should be extended to other FSA-authorised firms.  At this stage the FSA has decided not to introduce any new rules and will not extend the rules to other sectors.  The FSA’s supervisory focus is to ensure that the firms which are within the initial scope of the Remuneration Code are fully compliant from 1 January 2010.

The FSA has already committed to a review of the effectiveness of the Remuneration Code in mid-2010.  At that stage, as well as taking into account the lessons learned from this year’s exercise, the FSA will also consider the following:

·         The wider European work that touches on remuneration: a number of directives containing remuneration provisions are currently at different stages of European negotiation;

·         The elements of the Walker Review focussing on remuneration; and

·         The progress of the Financial Services Bill which may give new powers to the FSA in respect of remuneration.

The FSA does not think it beneficial to make further changes now as adjustments will be required to the existing code given the large body of European directives containing remuneration provisions.  In the meantime, the FSA expects firms to continue to focus on remuneration risk management.  The FSA will continue to address this issue in the course of its usual supervisory action.

All the firms covered by the Remuneration Code provided the FSA with remuneration policy statements (RPS) at the beginning of November.  The FSA is currently reviewing these RPS and follow-up meetings have been arranged or already held with firms.  The FSA has made it clear that it intends to assess firms’ 2009 reviews to ensure they are compliant with the Code before they are finalized.

 

Feedback remuneration statement

Press release

 

© FSA - Financial Services Authority