The FSA’s new regime for City bonus schemes is being reported widely as a partial climb-down. But that’s unfair, and it’s not the point: there’s enough meat left for them to chew on long and hard – if they’ve the will. And that’s the key.
The FSA doc starts with a pithy summary of all that’s wrong – so the correct issue is squarely on the table. The substance of their response is sound: a ‘general rule’ linking remuneration with risk management, plus some principles and guidance. As we’ve long advocated, the sanction is via linkage to capital adequacy requirements. Interestingly, the FSA is planning to go further (and faster) than the altogether less clever EC proposals, although both regimes are headed in broadly the same direction.
The trouble, as ever, lies in the degree of regulatory ambition. Despite protestations of determination, there is leisurely implementation timetable (why not demand compliance right now ? – nothing you are proposing goes beyond commonsense, or beyond what enlightened shareholders should already be demanding), and an early admission of weakness:
“Our Remuneration Code is not going to change the ‘bonus culture’ overnight”
Why not ? You have the principles, the power, and broad public support.
Well, we know the answer. Because you also have a craven government at your back, when what you need is resolute top-cover for some determined action.