Lawmakers and investment groups expressed “outrage” at the U.K. financial regulator’s decision to award staff bonuses totaling 19.7 million pounds ($32.3 million).
The Financial Services Authority’s bonuses were published through a Freedom of Information request filed by Don Foster, an opposition Liberal Democrat lawmaker. The FSA had already said in February that it had earmarked 10 million pounds to increase the salaries of supervisors. Hector Sants, FSA Chief Executive Officer, said at the time he wouldn’t take a bonus.
“It seems astonishing that a government agency can do this when the government is supposed to be clamping down on bonuses,” said David Bennett, chief executive officer of the U.K. Association of Private Client Investment Managers and Stockbrokers. APCIMS “is outraged,” his statement said today.
The FSA, like other regulators worldwide, is designing rules to curb bonuses at financial companies, which lawmakers blame for encouraging excessive risk-taking that helped to cause the worst financial crisis since the Great Depression. If banks are deemed to award disproportionate bonuses, the FSA will demand they hold more capital in reserve.
“It appears these bonuses have been paid out despite serious failings,” Foster said in a statement. “Regulators must now follow the lead of those in the rest of the public sector who have promised to freeze executive pay.”
The top FSA bonus was 90,000 pounds, while 10 staff were given a 50,000-pound award, Foster’s FSA data showed. The average pay-out was 8,000 pounds, he said. More than 170 staff earn a base-salary of at least 100,000 pounds, topped up with a bonus that averages 22,485 pounds, according to Foster.
“It’s generally acknowledged that the FSA needs to attract better quality staff,” said Abi Jones, an FSA spokeswoman today. “We need an overall compensation policy that’s credible and fair.” The regulator told staff that there would be no salary increases this year, she said.
A parliamentary select committee said in January 2008 that the FSA had “systematically failed” in its duty to supervise Northern Rock Plc, the first British victim of the credit crisis that was nationalized in February 2008. Sants then said in October that the FSA failed to properly probe financial companies’ boards and business strategies in general.
Since then, the FSA has overhauled its supervision and pledged more, better-qualified officials to monitor financial companies. The FSA has publicly broken with a philosophy that was labeled “light-touch.”
The extra money set aside in February was part of an additional 117 million pounds that the FSA will ask banks and insurers to provide in fees. It will go toward paying for 280 new employees, the FSA said in its annual business plan in February.
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