Responding to the FSA's new Code of Practice on remuneration policies, Peter Montagnon, the ABI's Director of Investment Affairs, said:
"This is an important step forward. The FSA has stuck to its principle of linking remuneration to risk, while making the Code less prescriptive and narrowing the scope of the organisations covered. The new version is much more likely to deliver the desired outcome without excessive compliance burdens.
"We agree with the FSA that the focus should be on the structure of remuneration, not the size of the package, which companies must be able to determine based on their need to compete.
"And as shareholders, we support the proposal that bonus pools should be formed only after taking into account the cost of capital, adjusted for risk.
"There is still work to be done so the details do not conflict with the Combined Code and other similar codes, ensuring the FSA proposals are in line with international arrangements.
"The FSA has promised further proposals for the wider financial sector in October. We continue to believe that great care needs to be taken to avoid reading across from banks to insurers and asset managers, whose businesses are substantially different in nature and pose much less risk to overall financial stability."
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