The UK’s Financial Services Authority has published a consultation paper that contemplates making a rule concerning compensation policies, and applying it to large banks and broker dealers.

The FSA code of practice has a general requirement that ‘a firm must establish, implement and maintain remuneration policies, procedures and practices that are consistent with and promote effective risk management’. It is now proposing to make this a rule. The paper also proposes that the code’s other 10 principles be put into the rulebook to help guide firms on the evidence the FSA will focus on when assessing compliance.

The FSA is also proposing to extend the code to about 45 of the largest banks, building societies and broker dealers operating in the UK.

The paper notes that in order to be effective, policies on remuneration should be implemented globally and in a consistent manner, and it notes that in deciding whether to implement these plans, “we will take into account whether we think there is satisfactory alignment of implementation plans by authorities in the major financial centres.”

IE