UK Treasury Committee criticises FSA approach to bonuses

A report from MPs looks at financial remuneration and corporate governance

LONDON - The UK House of Commons Treasury Committee has released a report entitled: 'Banking crisis: reforming corporate governance and pay in the city', calling for more emphasis on remuneration reform in the regulatory response to the crisis.

The report criticised the Financial Services Authority's (FSA) Turner Review, released in March, for understating the role of the financial bonus culture in the crisis, and suggests the UK regulator is not addressing the problem.

"Bonus-driven remuneration structures led to a lethal combination of reckless and excessive risk-taking," said McFall. "The design of bonus schemes was not aligned with the interests of shareholders and the long-term sustainability of the banks and has proved to be fundamentally flawed."

The group of 14 MPs, chaired by the Labour Party's John McFall, says the financial meltdown has exposed serious flaws in banking remuneration policies, especially within investment banking culture.

The committee examines UK financial remuneration practices and the role of players - including non-executive directors, institutional shareholders, auditors, rating agencies and the media - traditionally seen as influences, to curb the perceived pay excesses of banks' senior managers and executive boards.

The report can be read here.