The FT is reporting today that the FSA has finally produced its remuneration code on how bankers should be paid. I have only seen the headlines and brief summary of the proposals, but it seems that the FSA has shied away from being too prescriptive for fear of driving bankers abroad to less tightly regulated markets. Expect a deluge of criticism to fall on top of the FSA, whose days are numbered if the Tories return to power at the next election.
The draft code stipulated that two-thirds of each bonus should be deferred and that individuals should be rewarded on the basis of the firm overall rather than just the individual or the business unit. Apparently that isn’ t in the code to be published today. I posted last week on bonuses and clawbacks – click here to read it.
Undoubtedly the FSA will be criticised for not taking a more rigorous line, yet it is in a situation where it is damned if it does and damned if it doesn’t. If they had produced a very stringent code the institutions would accuse the FSA of destroying London’s competitiveness as an international financial centre. Other international regulators are not taking a hard line so why should the FSA? In my view it would be a bad move to have a government body dictating pay – like the failed prices and incomes policies of the 1970s – and ask yourself this: if the state starts dictating what bankers can be paid, who will be next up for regulation?