Should the FSA kill bonuses?

14 October 2008

1 minute read

Despite hysterical claims that the FSA is about to come down hard on bonuses, the evidence appears to be to the contrary. In yesterday's letter to banking bosses, Hector Sants explicitly said he had no intention of determining banks' remuneration, which he described as a matter for board members.

Instead, the FSA is limiting itself to platitudes. Specifically, it says bonuses should take into consideration risk, profits and annual appraisals. They should also comprise some stock, include a substantial deferred component, and be based on multi-year performance.

None of this will have any impact on the way bonuses are calculated. In the wake of the government's recapitalisation of the UK banking sector, the real question is whether it should. The German government has been bolder and stipulated a €500k yearly cap on executive pay and a bonus ban in return for its help. Should the FSA have done the same?

AUTHOReFinancialCareers UK

Insider Comment

Ja
Jazmaz
23 October 2008
btw- "the dude 10 hours ago" when ur no longer wet behind the ears, then coem alogn and discuss this issue.
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Ja
Jazmaz
23 October 2008
"the dude 10 hours ago" - actually no. I used to work as a trader, there are many equities and former FI boys on this and even many other execs and traders in broadsheets who agree that the Big B-Culture has to go.
These people did not produce anything. Ultimately those sophisticated derivatives produced air. As for hedging risks- huh. Lending was crazy and ALL former and current directors and top management for building soc's that became banks need to pay the tax payer back for their excesses. If you take the risk- u pay for it.
No one denies the pay packages for people that actually produce real growth- i.e. entrepreneurs. But these idiots that get paid for short term gain in a long term investment is exploitation and destruction as we now witness.
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th
the dude
23 October 2008
Why are people who evidently hate everything with relation to the financial sector even on this site? This is a website catering for individuals looking for a job in finance/investment banking. Therefore, i assume you are merely a couple of guys frustrated they never made it into investment banking in the first place. Thanks for your insightfull comments, now do us all a favour and leave.
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Jo
John
20 October 2008
Well said, anon.
Joe Bloggs better register with eBay to sell some of the gadgets purchased when times were good. I'll be bidding for some stuff!
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Do
Donald Duck
17 October 2008
Central bankers should realize that growth by debt never worked rather than killing bonuses. The FSA in concert with other regulators would be better off checking who was on acid at Rating Agencies to give AAA to securities backed by mortgages rather than killing bonuses. Central bankers would be better of slapping the BIS which should in return review dramatically banks Tier 1 and 2 capital requirements in Basel 2 & cancel possibilities to have off balance-sheets assets rather than killing bonuses. IAS 39 rules should be tighter and applied throughout the industry. Regulators would be better of forbid strutured products trading and engineering rather than killing bonuses. The FSA should introduce tight bonuses rules for people working in these divisions. The FSA should offer much harder examinations throughout the industry for every market participants rather than killing bonuses. And ultimately : consumers should also realize that a 30sqm studio in London for 500 grand and credit cards with 27% APR should have sound being very dodgy deals. Bonuses calculations should also be standardised and not left to the free appreciation of some Heads of Trading or Heads of desks.
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