Bloomberg News

U.K. Regulator Proposes Yearly Bank Bonus Disclosure

November 10, 2010

The U.K. Financial Services Authority proposed rules that would force banks to publish details about bonus payouts at least once a year.

Banks would be required to disclose how they link pay to performance, the “rationale for variable compensation” as well as information on the total bonus pool, the FSA said on its website today. The regulator said only the largest banks would have to comply with all of its disclosure rules.

The regulator is asking financial firms for “feedback on whether there would be any meaningful disadvantages in extending the scope of disclosure requirements to include” non-EU firms operating “as branches in the U.K.,” the London-based FSA said in the statement.

The FSA will present its final disclosure plans in December, after the Committee of European Banking Supervisors issues its guidelines on bonuses earlier that month. The EU is implementing rules on bonuses as part of a range of measures to rein in the risk-taking blamed for causing the worst financial crisis since the Great Depression.

Bankers would be limited to receiving one quarter of their bonus in cash in an upfront payout under CEBS proposals released last month.

The FSA has previously expanded the firms covered by its rules on bonuses from 27 banks to 2,500 firms including building societies and hedge funds. The deadline for banks and other financial firms to implement the rules is Jan. 1.

Proportionality

The FSA proposed financial firms be split into four groups based on their size. Full disclosure will apply to the largest banks, while the smallest firms will only have to provide “basic qualitative and quantitative information,” the FSA said.

The FSA’s guidelines are based on the EU’s Capital Requirements Directive 3, approved by the European Parliament and member states earlier in the year, which says that the rules should be proportionate.

The largest 26 banks will be in the first group requiring full disclosure followed by about 500 firms in the middle two groups, which will be exempt from providing information about the “finer details” and “design characteristics” of bonus payments, the FSA said.

Around 2,000 firms will be in the section needing the least amount of disclosure.

To contact the reporter on this story: Ben Moshinsky in Brussels at bmoshinsky@bloomberg.net;

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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