Barclays, HSBC, Lloyds Banking Group, RBS, and Standard Chartered have confirmed their commitment to comply with the FSA rule on remuneration, which comes into force on January 1 2010.
The new rules, in line with the G20 agreement, aim to set global standards for the implementation of remuneration principles set out by the Financial Stability Board. They include the creation of independent remuneration boards within every financial institution as well as a caveat that ensures that any bounses do not impinge on an institution’s capital base over the long-term.
Any extra remuneration offered by the banks will be based on long-term rewards, such as share options, rather than up-front cash bonuses.
The pledge means that bank employees may be subject to ”considerable” clawbacks of past bonuses if their performance deteriorates. The firms will also have to publish annual remuneration reports to help shareholders hold boards accountable.
By signing up to the pledge, the banks’ bonus system will come under FSA scrutiny – if any break the pledge they may face sanctions.
In a joint statement, the five banks say: “In a competitive and international business it is right to make sure that our staff are appropriately and competitively rewarded for sustainable, long-term performance. We will work with the FSA in adopting these remuneration reforms, recognising that all G20 nations have also committed to their implementation to ensure a level playing field.”
Chancellor Alistair Darling says: “It is vital that our financial services industry remains at the forefront of the industry globally and takes a responsible and long-term approach to remuneration. I am therefore pleased that the main banks incorporated in the UK have agreed to lead the way in implementing the agreement reached on bank remuneration at the G20, and expect them to set the standard for all other UK and international financial institutions to follow.”