To ask Her Majesty's Government what plans they have to ensure that recovery in the United Kingdom financial services sector will not lead to large increases in remuneration packages for senior directors.
The Government are clear that the banking industry, both in the UK and globally, needs to develop sustainable long-term remuneration policies that take better account of risk.
The FSA has published a code of practice on remuneration, which it intends to add to the FSA handbook; the code is currently being consulted on and the FSA aims to have it in place for firms' 2009 remuneration review processes. In parallel, the Walker review is looking, among other things, at strengthening remuneration practices as part of improvements to corporate governance. Neither the FSA's work nor the Walker review are intended to dictate the quantum of remuneration, either for individuals or at the level of groups or institutions. This remains a matter for the boards and management, accountable to the institution's shareholders. Institutional shareholders are expected to take an active interest in the design and effectiveness of remuneration practices as part of fulfilling their stewardship responsibility to their clients.
UK Financial Investments (UKFI) is overseeing the remuneration conditions attached to subscribing to the Government's recapitalisation fund and working with RBS and Lloyds in the context of the asset protection scheme. UKFI has worked to ensure that the banks subscribing to these schemes offer incentives based on the Government's principles on remuneration, including no rewards for failure, and to protect the interest of the taxpayer as a shareholder.