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Bonuses

Volume 707: debated on Tuesday 27 January 2009

Question

Asked by

To ask Her Majesty's Government what measures they propose to end any culture of excessive bonus payments in the financial sector when public funds are made available. [HL825]

UK Financial Investments Limited (UKFI), which is wholly owned by the Government, will oversee the conditions attached to subscribing to the Government's recapitalisation fund, including in relation to remuneration policies. UKFI will work to ensure management incentivisation based on long-term value maximisation, which attracts and retains high-quality management and which minimises the potential for rewarding failure.

More broadly, on 13 October the chief executive of the Financial Services Authority wrote to the chief executives of the major banks and building societies, setting out the criteria for remuneration policies and practices which are properly aligned to sound risk management and controls. The FSA is currently undertaking a review of regulated firms’ remuneration practices and the authorities have made it clear that failure to comply with the standards set out in the 13 October letter will be reflected in the FSA's risk assessment of firms and taken into account when setting capital requirements.