The code, published today, says firms must provide the FSA with a remuneration policy statement by the end of October.
It has back-tracked on three of the draft proposals, including making base salaries sufficient in the case that bonuses are not paid out where the firm makes a loss.
The FSA says it wants to avoid “giving the impression” that it wants to see higher fixed components of pay.
The code eases up on requirements for individual bonuses to take account of the overall performance of a group, rather than individual performance, making it guidance for senior staff only.
Only 26 firms will fall under the code, down from an estimated 47 in the CP.
Non-UK firms will be exempt from the rules unless they are part of a group that contains UK banks and building societies that have total regulatory capital exceeding £1bn.
The FSA says non-compliant firms could face enforcement action or be forced to hold additional capital if they pursue risky processes.
The regulator says the new code is designed to ensure boards link the total amount distributed with good risk management and sustainability and that individual compensation practices provide the right incentives.
The FSA says firms must comply by January 1, 2010 and international negotiations on common guidelines should be concluded in the first half of 2010.
FSA chief executive Hector Sants says: “The FSA is determined that banks’ remuneration policies should be consistent with, and promote, effective risk management. The new rules and code of practice, which will take effect from January next year, are aimed at achieving this.
“Whilst there is general international agreement on the need for supervisory action on remuneration policies and practices we will be the first major financial regulator to take this step. We think that it is important to have rules in place for 2010.”