British politicians and the Bank of England stepped up pressure on banks today to rein in bonuses, as a new UK code on bonus curbs from the country's financial regulator said some small firms may escape the net.
The Financial Services Authority (FSA) updated its remuneration code, saying it was closely aligned to rules agreed last week by the EU's Committee of European Banking Supervisors (CEBS), widely seen as the toughest bonus curbs in the world.
The UK and CEBS curbs take effect from January.
The revised UK code says at least half of a bonus should be in the form of shares that must be retained over a certain period and strict rules on guaranteed bonuses must be applied across a firm -- all in line with CEBS guidance.
Britain's previous code only applied to 26 banks but 2,700 firms the FSA regulates will have to abide by the revised rules.
Financial firms are divided into four groups, with the first two comprising the big banks, brokerages, investment banks and significant proprietary trading staff who are expected to face the full panoply of the new rules.
But firms in the lower two tiers -- small banks and building societies, and firms that don't put their balance sheets at risk -- can disregard many of the stricter curbs.
"The most significant of these are: the requirement to have a UK-based remuneration committee, deferral, and the proportion of variable remuneration paid in shares," the FSA said.
"For other rules, the FSA will apply a discretionary approach that is likely to result in less-onerous requirements," the watchdog added.
There remains deep political and public anger at the scale of pay for bankers after taxpayers had to rescue some lenders from the brink of collapse two years ago.
Many banks have bumped up base salaries in the face of tougher bonus rules.
Britain's ruling coalition appeared to send out mixed signals today.
The deputy prime minister warned banks the government will not remain neutral if they fail to cut this year's bonus payments and increase lending to small companies.
"The banks should not be under any illusion, this government cannot stand idly by," Nick Clegg said in an interview in the Financial Times, without elaborating on what the coalition government would do if banks did not comply.
"It is wholly untenable to have millions of people making sacrifices in their living standards, only to see the banks getting away scot-free," he said.
But a spokesman for prime minister David Cameron did not outline any further measures to rein in remuneration beyond measures that have already been announced.
Reuters
