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Alistair Darling hands pay deal powers to the FSA

In a move which is sure to impact upon the overall competitiveness of the London financial markets it has been revealed Alistair Darling proposes to give the FSA (Financial Services Authority) the power to veto the remuneration packages of bank executives. If the FSA believe the package encourages excessive risk it can demand that the bank in question is forced to put aside additional capital into a reserve to cover any perceived increase in the risk profile.

While this will make good headlines over the next few days, the clamping down upon what has for many years been a free-market in the UK financial markets has the potential to seriously impact on the competitiveness of London compared to other markets around the world. There is no way that the major financial institutions of the world will allow the FSA to have the final say over how much they pay their staff and levels of bonus. This has the potential to blow apart the former comfortable relationship between the banking industry and regulators and could reduce business levels in London.

Many people believe these proposals, which have no chance of coming into existence prior to the general election, are nothing but a PR stunt and will be watered down or withdrawn after the election.

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