Bonus schemes should be designed in a way that does not put banks at too much risk, the Financial Services Authority (FSA) has stated.
The body has become the first major regulator in the world to publish rules on remuneration schemes at financial institutions and the FSA's chief executive Hector Sants believes it has taken the right step.
He said: "The FSA is determined that banks' remuneration policies should be consistent with, and promote, effective risk management.
"The new rules and code of practice, which will take effect from January, next year, are aimed at achieving this."
He added that there is general international agreement on the need for supervisory action on remuneration but the FSA has taken the lead on the issue as it feels it important to have the rules in place for the start of 2010.
Yesterday, Mr Sants stated that action on the moral issues relating to bonuses would have to be taken by the government if at all.
He made his comments in a piece for the Financial Times.
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