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FSA warns MPs about bank bonuses

The Financial Services Authority (FSA) has this evening warned MPs that they must not "pass the buck" with regards to the regulation of bank bonuses in the future. Despite the fact that the UK government was firmly behind an increase in regulatory powers, which would effectively allow the FSA to dictate how and when bonuses were agreed, the UK government seems to be taking a step back.

There is a feeling that the UK government is concerned that the potential regulations required to control bank bonuses will in some way be challenged in the courts, potentially under the human rights act. If this was the case, and those in the city have significant legal assistance, the government would end up with "egg on its face". By effectively passing the buck to the FSA the situation would reflect badly on the FSA rather than the government if it was to fail.

This is the latest in a number of potentially damaging disputes between the government, the FSA and the Bank of England. Despite all parties involved appearing to sing from the same hymn sheet some time ago, the cracks are starting to show at the wrong time. What will happen next?

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