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The UK Financial Services Authority urges firms to review compensation policies to make sure that these are consistent with sound risk management. In an open letter to CEOs, Chief Executive Hector Sants says that the FSA shares the findings of private sector bodies about inappropriate remuneration schemes having contributed to the present market crisis. In many cases the remuneration structures of firms may have been inconsistent with sound risk management, FSA states.
Although the FSA has no wish to become involved in setting remuneration levels “we want to ensure that firms follow remuneration policies which are aligned with sound risk management systems and controls, and with the firm's stated risk appetite”, Chief Executive Hector Sants says in an open letter to CEOs.
We would further expect firms to be moving towards good practice, the letter states. Given the events of the past year the FSA expects that firms recognise the need to review their remuneration policies and to take steps to change them if necessary, the FSA says and announces to publish further information early next year.