“CEBS announcement, on top of the FSA rules, changes dramatically the bonus landscape, the BBA said today. Taken together, these rules mean that for the key people, whatever is paid in bonus is half in shares, mostly locked away for several years, and any cash will go straight to the tax man. This represents a huge change away from the bonus arrangements of the past.
“The BBA recognises that the reform of pay structures plays a significant part in restoring confidence in the industry. Banks link pay, both the fixed and variable elements, to the long term success of the business and do not reward staff in ways which encourage undue risk taking.
“For the past year, pay policies and distributions have been regulated by the Financial Services Authority. Banks have also paid additional tax on variable pay. Remuneration policies at banks in receipt of government support are monitored by the government.
“The UK has moved further on the reform of remuneration than any other jurisdiction. Today’s guidance from CEBS represents a levelling of the EU playing field for most institutions.
“We maintain that reform of the remuneration system in financial services must be globally coordinated. A global industry needs to conform to global standards, as any jurisdiction which takes a lighter approach will attract business and staff.
“We now need other jurisdictions, notably the USA and emerging markets, to coordinate their reforms with the EU rules.”