FSA won't get involved in individual bonus payouts

Big hitters expecting multi-million pound bonus payouts this year can breathe a slight sigh of relief as initial indicators suggest that FSA's guidelines on pay to be unveiled this week are unlikely to result in caps for individual compensation.

Speaking on the BBC's Andrew Marr Show yesterday, Hector Sants, head of the FSA, said: "The question of the size of individual payments is not one for the regulators. That is one for politicians and society as a whole. If politicians wish to take a view on that, then they should say so, but they should not be asking the regulator to carry out a pay policy."

His comments come after a week of reporting for European banks, when the likes of BarCap also revealed it was going to be rather generous with its bonus payouts, and even RBS said it "cannot ignore" competitor pay practices after a string of resignations.

In a further sign the FSA doesn't want a hands-on approach, Sants said: "The question of how the total pot of profits should be split between the shareholder and the employees is one primarily for the shareholder to answer."

This is not to suggest that the FSA is pro-bonus in anyway. In March its consultation paper 'Reforming Remuneration Practices in Financial Services', suggested any guaranteed payouts would be more closely linked to the long-term future of the firm.

One proposal suggested every employee must defer 66% of any significant bonus "with a vesting period appropriate to the nature of the business and its risks". It also said yesterday that a greater chunk of any bonus should be paid out in shares.

The formal guidelines are expected to be unveiled in the next few days after a consultation period stretching back to February.

Sants said the code would: "Make absolutely clear that you cannot calculate bonuses in a way which encourages unreasonable risk-taking and puts the institutions at risk, which was the case in the past."