The UK Financial Services Authority (FSA) has published a consultation paper (CP 09/10 Reforming remuneration practices in financial services) which puts forward a Code of Practice (Code) on remuneration and formally consults on applying it to a group of 45 large banks and broker dealers and incorporating it into the FSA rules. The CP invites discussion on the possibility that the Code should be applied to all FSA-authorised firms.
The draft Code’s basic requirement which would become an FSA rule is that “a firm must establish, implement and maintain remuneration policies, procedures and practices that are consistent with and promote effective risk management.” The FSA proposes that the Code’s remaining ten principles should be put into the FSA rule book as guidance as to the evidence the FSA will focus on when assessing compliance with the Code.
The CP notes that in order to be effective, remuneration policies need to be implemented in a consistent global manner. In deciding whether and when to implement its proposals, the FSA will take into account whether it considers that there has been satisfactory alignment of implementation plans with respect to remuneration policies by regulatory authorities in other major financial centers.
The consultation period on implementation of the Code for larger banks and broker dealers lasts until May 18. The period for discussion and feedback on whether to extend the Code to other regulated firms ends on June 18.