Bankers saved from massive crackdown on bonuses

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The FSA is set to lay out a remuneration code later today, ordering bank management to link pay more closely to risk.

That would be a watered down version from the draft of the code written up in March, which included specific recommendations that two-thirds of each bonus should be deferred, with the pay out taking into account the overall performance of a firm rather than just the individual or division. The code was set out to discourage excessive risk-taking in the City.

Hector Sants, the FSA's chief executive, said the new guidelines were "designed to ensure that boards prevent management from introducing compensation policies that, in effect, subordinate the interests of capital providers to those of employees."

He called the initiative "Pay what you like, but within your means," and said that the FSA had to ensure its code was "in line with the current international thinking".

The FSA intends to "rigorously police this code," Sants wrote. He added, "Those who fail to comply will be required to hold more capital, which in turn will decrease profitability and thus the pool available for distribution."