FINANCIAL SERVICES
Government to force banks to disclose staff paid over £500,000
The government is to require big banks and the largest building societies to reveal how many of their employees earn more than £500,000 a year.
The draft regulations on greater disclosure, published 10 March 2010, will force banks to state how many staff are in £500,000 bands, starting at £500,000 a year and going up to salaries of £5 million, after which successive bands will increase by £1 million. But “high end” earners names will not be revealed under new legislation to be introduced following the recommendations of the Walker Review.
The ex-City regulator Sir David Walker was commissioned by the government in February 2009 to undertake an investigation into pay in banks and other financial institutions as part of a general review examining the corporate governance of financial services firms. The Walker Review – as it inevitably became known – produced a set of proposals for wider consultation in July 2009, and final recommendations were published 26 November 2009.
The Walker Review proposed to enhance pay transparency in the big banks by requiring public disclosure of the number of employees earning more than £1 million, broken down by bands of pay.
The government has decided to take a tougher line by insisting that disclosure should start at annual salaries of £500,000.
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Myners unveils plans for tougher reporting requirements
Lord Myners, the City Minister, speaking at a meeting held by the British Private Equity & Venture Capital Association (BVCA) on 10 March said: “From the outset of the crisis, the government has been focused on eliminating rewards for failure and ensuring that remuneration does not incentivise excessive risk taking or inadequate risk management. And we will continue to lead on this issue - David Walker’s proposals will be implemented to give shareholders much more power and information to shape remuneration policies at banks. And in some cases we may go further.”
He added: “Later today the government will publish draft regulations on greater disclosure on pay for the top earners at banks. This will include proposals for narrower disclosure bands than Walker proposed, starting with salary packages below the £1 million floor that he suggested. We will consult on the idea, but as the Chancellor has said - most people are convinced that more disclosure is important, if we are to have real transparency on remuneration practices and effective shareholder stewardship.”
--> Read the full speech at www.hm-treasury.gov.uk/speech_fsst_100310.htm.
DOCUMENT EXTRACT
Draft Regulations on Remuneration
The 2010 Financial Services Bill provides HM Treasury with a power to lay regulations requiring greater disclosure of banker’s pay. As part of the scrutiny process for the bill, the Government has today published draft regulations to members of the House of Lords. They will be used to understand how the Treasury will make use of the power being granted.
The draft regulations build upon Sir David Walker’s recommendations that there should be enhanced disclosure of remuneration for the largest banks and building societies that operate in the UK.
The requirement for this disclosure will sit alongside and complement the FSA's oversight over the system of rewards. It will enhance shareholders' ability to exercise effective governance over the remuneration paid in companies in which they are investors and enhance public confidence in the management of risk and reward.
The regulations will be further refined in advance of a full public consultation, which will take place after the Financial Services Bill gains Royal Assent. The disclosure regime is intended to come into force for annual reports in respect of 2010 issued in early 2011.
--> Source: HM Treasury, 10 March 2010: www.hm-treasury.gov.uk/fin_bill_draftregulations.htm.
Want to know more?
Title: Draft Regulations on Remuneration laid before Parliament under section 9 of the Financial Services Act 2010, for approval by resolution of each House of Parliament.
Availability: Download the regulations in PDF format at www.hm-treasury.gov.uk/fin_bill_draftregulations.htm.