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.
America’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.
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.
Larger lenders would have to submit proposals for their remuneration structures to ensure that they comply with the guidelines.
The Fed’s board of governors is expected to meet this week to put the finishing touches to the guidelines.
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.
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.
Chancellor Alistair Darling is understood to have urged senior banking executives to exercise caution in their pay policies, while City minister Lord
Myners said last week that the scale of some bonuses still on offer at major financial institutions was “unacceptable”.
But Barclays chairman Marcus Agius, whose bank is on course for record profits this year, has said that while bonus structures will change, “we will still end up with a globally competitive market” in which large bonuses would be paid.