The Government are clear that the banking industry, both in the UK and globally, needs to develop sustainable long-term remuneration policies that take better account of risk.
The FSA has recently completed a consultation exercise on its code of practice on remuneration, which it intends to add to the FSA handbook. The FSA will be issuing a response statement shortly and aims to have the code in place for firms' 2009 remuneration review processes. The Chancellor has also asked the FSA to provide an annual report on remuneration practices, including compliance by firms with the new code. This report will assess whether remuneration practices are likely to lead to a build-up of systemic risk, and make recommendations for action if this is thought to be the case.
In parallel, the Walker review is looking, among other things, at strengthening remuneration practices as part of improvements to corporate governance. Sir David will be publishing his consultation paper on 16 July 2009. Neither the FSA's work nor the Walker review is intended to dictate the quantum of remuneration, either for individuals or at the level of groups or institutions. This remains a matter for those institutions.