US bonus rules promise to be less strict than EU regulation

REGULATORS in the US are today expected to unveil a set of less restrictive bonus regulations than those adopted by the EU in December.

Although the Federal Deposit Insurance Corp (FDIC) is thought to be planning a similar set of headline rules, the details will be less prescriptive. The FDIC is expected to 50 per cent of the total bonus is deferred over three years, with no more than 20 per cent in cash up front.

But the US authorities’ rules are likely to be much less wide-ranging than those imposed by the EU and implemented by the UK’s FSA.

The FSA has chosen to apply EU rules to 2,500 financial firms in the UK, whereas the US rules are likely to apply only to top executives at firms with over $50bn (£31bn) in assets. The firms’ management will then be responsible for creating incentive schemes for other workers in roles that pose “material risk” to the financial system. The US rules are also unlikely to demand that firms include a “clawback” clause in contracts to retrieve money paid in bonuses.

A key question is whether the FDIC will adopt the same provision as in the UK that the rules apply to all the foreign subsidiaries of any London-based firm, which has prompted concerns that UK banks could find it difficult to compete for staff in Asia.