UK financial watchdog says banks must reflect cost of living crisis in wages

Britain’s financial watchdog said on Tuesday that the cost of living crisis, meeting climate targets and improving diversity should be reflected in how banks set salaries and bonuses.

“Your role is essential in ensuring that your company’s compensation policies support your company’s purpose, long-term strategy and values, while reflecting the current economic environment,” said the Financial Conduct Authority (FCA ) in a letter to the chairs of the compensation committees. in banks.

Fuel bills, food prices and borrowing costs are all rising in Britain, weighing on household incomes, and businesses have until August 31 to respond to the watchdog.

“This includes how your business will consider the impact of the current economic environment on bonus pools and individual results,” the FCA said.

Some UK banks have already started rewarding staff with cost-of-living payments. HSBC, for example, said on Monday it would give some of its employees 1,500 pounds ($1,830) to help them deal with inflationary pressures.

The FCA has also asked the banks to provide details on how their environmental, social and governance (ESG) commitments relate to the remuneration policy, including any targets.

“We believe that tying progress against these commitments to a measurable proportion of salary could be effective in encouraging individuals to take responsibility for change,” the FCA letter states.

Compensation also has a role to play in improving diversity and inclusion at banks, the watchdog said.

“In your role as chairman, your oversight of the link between the performance management framework and incentives is critical and you may wish to consider how the compensation policy takes into account some of the risks that a person’s work preferences employee negatively influence his remuneration.”

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