Financial Services Authority’s (FSA) code of practice on remuneration polices, published on 26 February, said that those setting bonuses in the banking sector should ensure remuneration policies are based on staffs’ contribution to the financial performance of the company and responsible attitudes towards risk.
Although the code of practice recognised the need for competitive reward packages it urged employers to defer two thirds of every large bonus.
It also said future pay-outs should be linked to the long-term performance of the business.
It stipulated that a firm’s remuneration practices should be consistent with sound risk management and not expose it to excessive risk.
FSA chief executive Hector Sants said: “We have already outlined the work we have been doing on remuneration during the last 12 months. The code of practice we have published is the next stage in that work and clearly lays out the framework we expect firm’s to adopt.”