Other countries must play part in bank pay reform

Coordinated action by the world's financial regulators will be the only effective way to reform pay structures in the financial sector, the British Bankers' Association said today in response to the FSA's paper.

Angela Knight, chief executive of the British Bankers' Association, welcomed the Financial Services Authority's new code on remuneration, but pointed out that it would only apply to 26 banks and financial firms operating in the UK. It is therefore essential that other countries not only do the same but on the same timetable: without this, the risk of losing business overseas - and so jobs and tax revenue - is high.

"The FSA Code links pay structures and risk together; it requires the industry to make sure that risk is properly addressed and that bonuses reward long-term good performance. The FSA will police this and impose penalties on firms which do not observe the code. We consider this is the right way forward.

"Our concerns are that other countries have talked about similar changes but have not made them. For this Code to succeed, our European partners and the G20 countries must also step up to the plate and do what the UK has done. The principal cause of the global financial problems was not bankers' pay. It was however a contributory factor globally - as such it needs to be addressed globally.

"Too often in the past, business has moved out of the UK as in various ways our country has become uncompetitive. Many now rightly raise concerns that Britain has lost industry and manufacturing to other parts of the globe.

"So whilst these changes are made in the UK - and importantly the UK banks have been working with the FSA for some time to get their pay structures right - the UK must remain a competitive banking industry, and other countries must also make the changes too."