RTTNews - U.K.'s Financial Services Authority issued warning for banks that guaranteed bonuses for more than a year.

The FSA said those banks would break the proposed rules on remuneration, which will be effective from next year.

In a letter, dated July 15 and published on FSA Web site on Monday, sent to more than 40 chief executives in the banking and finance industry, the financial watchdog said any bonus deals with a guarantee of more than a year, agreed after a consultation on pay that began in March would be barred by the new rule.

The consultation on pay that has closed by now was a result of the crisis in the banking sector. There is a speculation that short-term pay incentives led financial market participants to take excessive risk and thus leading to the crisis.

It is essential that the market should not revert to remuneration practices that would be incompatible with our intended outcomes if the rule and code become effective next year, the FSA Chief Executive Hector Sants said.

I would draw your attention to the fact that guaranteed bonuses which run for a period of more than one year may be inconsistent with effective risk management, he said.

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