FSA to toughen bank pay law

Marion Dakers

IGN banks operating in the UK could be forced to disclose the pay packets of their senior bankers, according to a consultation paper released by the Financial Services Authority (FSA) yesterday.

The FSA said it is seeking feedback on whether to close the loophole that exempts banks based outside the European Economic Area from disclosure rules on remuneration.

All UK banks will be asked to reveal details of pay policies on at least an annual basis, the FSA said, with the country’s top 26 institutions held up to the strictest scrutiny in reform linked to the Basel III global rules.

Bonuses, deferred pay and golden handshake deals will be among the list of awards that must be disclosed by banks operating in the UK, instead of the current system where banks only release the total amount spent on pay each year.

The UK has already introduced a one-off tax on bonuses and will impose a four-year levy on banks from the start of 2011.

Consultancy PwC said the plans were less onerous than the mandatory breakdown of the number of staff in each pay band, which had been mooted by the Treasury.

“The proposals do not include some of the more prescriptive elements of previous proposals, such as disclosure by pay bands. This should help prevent the unintended consequences that can sometimes follow pay disclosure, for instance pay ratcheting,” said Tom Gosling, a partner at PwC.