The UK Financial Services Authority proposes
to extend its banker pay and bonus rules to include more than 2,500
firms.

The financial regulator’s updated remuneration
code will include all banks and building societies, asset managers,
hedge fund managers, UCITS investment firms.

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Firms that engage in corporate finance,
venture capital, the provision of financial advice and stockbrokers
could also be affected.

Those subject to the code will include senior
management and anyone whose professional activities could have a
material impact on a firm’s risk profile.

The rules, which are intended to bring the UK
into line with future EU pay regulations, could threaten London’s
ability to recruit and retain wealth management staff, especially
as the employment market heats up in Asia.

 

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Global reform calls

The British Bankers’ Association
(BBA) said the UK had moved further and faster on reform of
pay and bonuses than any other country.

“The BBA maintains that reform of the bonus
system in financial services must be globally co-ordinated. 
We now need other countries to co-ordinate their reforms with the
UK and EU rules,” it said in a statement.

The changes propose that:

  • At least 40% of a bonus must be deferred over a period of at
    least three years for all ‘code staff’. At least 60% must be
    deferred when the bonus is more than £500,000 ($780,580).

 

  • At least 50% of any variable remuneration components must be
    made in shares, share-linked instruments or other equivalent
    non-cash instruments of the firm. These shares will need to be
    subject to a minimum retention policy.

The consultation period closes on 8 October 2010 with the rules
coming to effect from 1 January 2011.