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The FSA issues new corporate governance guidelines

The FSA has today issued a raft of new guidelines with regards to the financial services industry and remuneration packages which have come under severe criticism of late. In what many see as purely a public relations stunt, and something which will never actually reach the market, the FSA is suggesting increasing the fixed salary component of future remuneration packages and linking bonuses to profits and not turnover.

The regulator has also indicated it would prefer bonuses to be deferred and the personal goals of each and every employee to be measured against a company's risk profile which should ensure less reward for greater risks. The overall emphasis is on reducing the risk profile of the UK financial sector in general and withdrawing the potential for substantial bonuses were substantial risks have been taken with the underlying business.

In reality the FSA is not in a position to set remuneration packages for free-market companies, although the regulator could have some influence with government owned operations such as Northern Rock, as much as it would like to. There is a feeling that the government and the regulator are working together to try and deflect much of the criticism which has been directed their way over the last few weeks and months.

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