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Bankers’ bonuses under FSA scrutiny

Bankers’ bonuses will come under scrutiny as part of the FSA’s assessment of financial institutions’ exposure to risk.

FSA chief executive Hector Sants said in a speech at the IMA dinner last night: “From the regulatory point of view, it is not our role to dictate the quantum of individual remuneration, that is for the market, but we do need to consider the implication of remuneration structures when judging the overall risk of individual institutions. We will do this with increased intensity.”

Sants also urged senior management in the banking sector to commit to improving their risk management.

He said: “In many cases, management of both credit and liquidity risk has been inadequate, and recent events are evidence of this. It is now up to us, and by that I mean the FSA and senior management in the industry, to understand the steps that need to be taken to and to take action.

“As I have said before, a good test for non-executives is to ensure their Board understands the circumstances under which their firms will fail and are comfortable with that risk.”

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