12 August 2009
City Chairman Stuart Fraser comments on FSA guidelines
Speaking in response to guidelines about reforming remuneration
practices in financial services released today (Wednesday) by the
Financial Services Authority Stuart Fraser, Chairman of the Policy
and Resources Committee at the City of London Corporation,
said:
"We welcome the FSA’s new guidelines on salaries and incentives.
The City has to be able to attract talented people both
domestically and from overseas if it is to compete in the future
against existing and new emerging financial centres."
On remuneration Stuart Fraser said:
"High rewards are not necessarily a reflection of risks
taken."
"Used properly bonuses can be an extremely flexible management
tool. They mean you can reward in the good times but not be stuck
with an inflated salary cost base when times become less
profitable. They can be good for business as the compensation cost
base can adjust to changing circumstances without recourse to
redundancies or, when business picks up, to a hiring frenzy."
"I agree with Lord Turner that remuneration structures should
form part of the process when regulators decide on the quantum of
capital that financial institutions should carry to transact
certain types of business."
On the regulatory framework Stuart Fraser said:
"It is in our interests to have an internationally respected
regulatory framework which inspires confidence in both investors
and businesses. A level playing field and appropriate transparency
are essential building blocks."
"It would not be in the City's interest to try and compete with
those centres that do not have a quality regulatory environment. In
financial services reputation is still a key asset."
"The UK cannot impose regulatory requirements in isolation
without running a major risk of losing business to other well
respected centres who adopt a more flexible and pragmatic approach.
The key issue is not remuneration but identifying what certain
types of activities can create systemic risk and dealing with that
in terms of restrictions and/or capital requirements."
Ends -