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The recent weeks explosive development of the financial crisis, has prompted a heated public debate on banks’ use of bonus remuneration systems. The damaging effect that bonus systems and share option schemes have on financial stability have become apparent to regulators and politicians, as has the missing link between executives’ performance and their sky-high salaries.



Last week, the topic was discussed at the ECOFIN meeting in Luxembourg with the conclusions that an update of the Commission’s 2004 Recommendation could be necessary. British Prime Minister Gordon Brown has further stated, “the days of big bonuses are over”.



Today, the British Financial Services Authorities (FSA) sent out a letter to CEOs of the biggest banks in Britain, stressing the need to take immediate action to change remuneration structures. CEO’s are urged to carefully reconsider their remuneration policies, and policies not aligned with sound risk management are considered “unacceptable”.



It seems there is a hope that politicians and regulators have finally understood the gravity of the situation and that regulatory measures might be initiated. However, there is reason to doubt that these measures will go far enough.



The CEO letter from FSA is to be found below







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