Fed prepares to detail new bonus regime

THE US Federal Reserve is to unveil a four-pronged approach to reforming remuneration structures, as the G20 world leaders prepare to meet in Pittsburgh this Friday, with pay and bonuses high on the agenda.<br /><br />America&rsquo;s central bank, chaired by Ben Bernanke, aims to link pay to long-term performance, as part of an international drive to reduce the element of risk in the financial system.<br /><br />The Fed will advocate risk-adjusted bonus schemes, demand that performance measures used to calculate bonuses stretch over a number of years, discourage bonuses for short-term profits and introduce deferred compensation.<br /><br />Larger lenders would have to submit proposals for their remuneration structures to ensure that they comply with the guidelines.<br /><br />The Fed&rsquo;s board of governors is expected to meet this week to put the finishing touches to the guidelines.<br /><br />The move comes ahead of the G20 summit, at which the US is expected to fight a rearguard action against France and Germany, both of which favour caps on bonuses.<br /><br />Bankers and politicians have been stepping up the rhetoric against excessive bonuses ahead of the G20, at which world leaders will attempt to draw up a global set of guidelines on pay.<br /><br />Chancellor Alistair Darling is understood to have urged senior banking executives to exercise caution in their pay policies, while City minister Lord <br />Myners said last week that the scale of some bonuses still on offer at major financial institutions was &ldquo;unacceptable&rdquo;.<br /><br />But Barclays chairman Marcus Agius, whose bank is on course for record profits this year, has said that while bonus structures will change, &ldquo;we will still end up with a globally competitive market&rdquo; in which large bonuses would be paid.