'Risk-driven bonus' return warning

Bank bosses have been warned against using the prospect of bonuses to encourage workers to take unnecessary risks with investors’ money.

Speaking ahead of the upcoming publication of a new set of guidelines on pay and bonuses within the banking industry, the head of the Financial Services Authority (FSA), Hector Sants, has expressed his confidence that the days of risk-driven bonuses are now over.

’Our job is to make sure that banks in their bonus policies, their compensation policies, do not put these banks at risk as in the past,’ he told the BBC’s Andrew Marr show.

’We have made absolutely clear that we do not expect multi-year guarantees to be paid.’

Despite this, the City watchdog acknowledged that the issue of individual payments to banking workers will remain ’one primarily for the shareholders’, though any packages would be required to be far more transparent than before.

At the same time, however, a number of larger banks and financial institutions have signalled that they may look to hand out bonuses over the next year in return for improved performance, with the investment banking sector having fared particularly well over the past couple of months.
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