UK: bankers' pay and the FSA

Bank reward structures continue to be the focus of attention as the causes of the turmoil in the financial markets are debated. In an interview on BBC Television - reported here in the Guardian and here in the Financial Times newspaper - the Prime Minister, Gordon Brown, observed: "I think there's an element of the bonus system that is unacceptable … When you have got a bonus on your salary based on short-term deals that has no relationship to long-term profits, you have got to look again at what that system is doing".

Legislation appears unlikely. Closer scrutiny is, instead, expected by the FSA and has, in fact, been likely for some time (see here).  Indeed, the FSA's new chairman, Lord Turner, is reported in the Financial Times as saying: "There are some very important issues to be questioned about the time periods over which bonuses are paid out, the information on which they are measured ... These are legitimate issues for regulators to be quizzing banks about". These are, of course, questions for the boards of banks and the role of bank directors will, in this regard, come under scrutiny in the coming months. 

Update (22 September 2008): today the Chancellor has, in his speech to the Labour Party Conference, commented on his intention to examine bonuses: click here to listen (download in MP3 available here). For further comment about the role of shareholders and the remuneration committee, see here.