29 July 2010 Last updated at 11:35 ET

FSA tightens bankers' pay rules

The new rules will affect much more of the financial sector

The Financial Services Authority (FSA) has announced plans to update its guidelines on bankers' pay, following the agreement of new European rules earlier this month.

The rules include tighter restrictions on bonus payments and pension deals, and will now apply to more than 2,500 City firms.

Previously, only the biggest banks were subject to FSA pay rules.

The changes are due to come into force in October after consultation.

Bonus shares

Earlier this month the European Parliament agreed EU-wide rules on bonus payments for banks, hedge funds and other financial institutions, designed to reduce risk-taking.

But implementing them was left up to individual EU members and their regulators.

The FSA now wants to consult with the financial sector to find the best way to do this.

The changes include deferring at least 40% of bonus payments over a period of three years, and paying at least 50% of bonuses in shares.

All banks and building societies, as well as asset managers, hedge funds and venture capitalists will need to comply with the rules.

The guidelines will be in addition to the earlier code on remuneration introduced by the FSA last year.