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Banks must submit remuneration policies by October, says Sants

FSA chief executive Hector Sants has written to banks and large financial institutions advising them to submit a remuneration policy statement by the end of October.

In March the FSA published a consultation paper that aims to align remuneration policies, procedures and practices to ensure they promote effective risk management.

In the letter sent to CEOs last Wednesday, Sants says the FSA will move forward with its proposals, together with updated supporting principles that take account of consultation responses, from January 1, 2010.

He says firms must providing the information necessary for the FSA to verify that remuneration policies and practices will be compliant with the new code by the end of October.

He says: “We will be writing shortly to you and to the chairman of your group’s remuneration committee to set out the information that we will require in the remuneration policy statement.

Sants says guaranteed bonuses that run for a period of more than one year may be inconsistent with effective risk management.

He adds: “Moreover, we are not proposing to extend grandfathering arrangements to obligations entered into after publication of our consultation paper on 18 March 2009.

“It is essential that the market should not revert to remuneration practices that would be incompatible with our intended outcomes if the rule and code become effective next year.”

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