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FSA publishes revised remuneration code

The FSA has published an updated remuneration code for the largest banks, building societies and broker dealers.

The revised code will cover a total of 2,700 firms, including investment firms that fall under the capital adequacy directive.

The changes have been made to bring the code in line with principles on pay across the European Union.

The main changes are that at least 50 per cent of bonuses should be paid in shares, that bonuses paid in shares should be subject to an appropriate retention period, and provisions on guaranteed bonuses should be applied on a firm-wide basis.

The code will be applied proportionately, with firms categorised into one of four tiers with different minimum expectations of compliance for each level.

Tiers one and two contain credit institutions and broker dealers that engage in significant proprietary trading or investment banking activities.

Tier three is mainly made up of small banks and building societies and firms that may occasionally take overnight or short-term risk with their balance sheets.

Tier four covers firms that generate income from agency business without putting their balance sheets at risk.

Firms already in the scope of the FSA’s remuneration code will have to comply with the new code from January 1 next year.

Other firms will have to comply as soon as possible, and no later than July 31, 2011.

The FSA is also bringing in new rules around pay disclosure.

Firms will need to disclose details of their remuneration policies at least on an annual basis, with the first disclosure no later than December 31, 2011.

Firms in the top tier will need to make full disclosure, while firms in lower tiers will be subject to less onerous requirements.

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