On 8 December 2009, the FSA announced that it has, for the moment at least, decided not to apply the special remuneration requirements contained in its Remuneration Code outside the top 26 financial institutions.
On the day before the pre-Budget report is expected to have more bad news for banks and top-earners, this is a rare good piece of news (and indeed this may have been timed to sweeten the medicine being administered over the next few weeks). However, the reprieve will only be temporary. In mid-2010, the FSA is to revisit its Remuneration Code and will consider again how remuneration should be supervised across the rest of the banking sector and in other areas such as insurance and funds.
This makes sense because EU legislation on the regulation of remuneration is progressing under the following umbrellas – CRD 3 for banks and investment firms, UCITS IV and AIFM for fund managers and Solvency II for insurers, life offices and reinsurers. The FSA will also be able to monitor how the Walker proposals are bedding down and take account of the progress of the Government's Financial Services Bill which contains specific requirements on the regulation of remuneration.
Finally, the FSA will be able to take account of the outcome of 2009 bonuses and the process for determining those awards.A summary of the remuneration provisions in the Financial Services Bill and the final report of the Walker Review can be accessed here.
It would have been difficult for FSA to push ahead now while these developments were still going on. However, given the scope of these EU requirements, the reality is that regulation of remuneration will soon be extended across many authorised firms in different sectors albeit at a slightly slower pace than the FSA had originally proposed.
The FSA discussion paper also contains a useful summary of responses to its consultation on the extension of the Code, the FSA's own reaction to them, as well as listing current European proposals. It also includes an overview of findings from its remuneration visits to some of the 26 firms currently covered by the Code which HR and compensation professionals may find useful. For a link to the FSA's announcement and feedback paper, please click here.
This article originally appeared in Law-Now, CMS Cameron McKenna's Free Online Information Service. To register for Law-Now, simply visit www.law-now.com and select the 'Register' link in the main navigation.
