BANKS that have offered their staff a guaranteed bonus for longer than a year could be hit with heavy penalties, the head of the Financial Services Authority has warned, as the embattled City watchdog launches a crackdown to prove it has the teeth to regulate big institutions.
In a letter sent to over 40 chief executives in the financial services industry, Sants admitted that the new code, which calls on banks to erect pay policies that are “consistent with and promote effective risk management”, will not come into effect until January 2010, two months later than planned.
But he warned that the FSA would be able to revoke any guaranteed bonuses pledged to employees after 18 March, when the regulator initially published its consultation paper on pay, meaning star bankers who have been lured with the promise of big bonuses could see the terms of their remuneration altered.
Sants said it was “essential that the market should not revert to remuneration practices that would be incompatible with our intended outcomes”.
In the letter, which surfaced as the Tories announced plans to abolish the City watchdog, Sants said banks would have to submit a remuneration policy statement by October of this year to prove that they plan to comply with the FSA’s wishes.