Banks Fear Challenges in Attraction and Retention of Talent as new FSA Remuneration Code Takes Effect

LONDON, August 16, 2011 -

- PA Consulting Group and City HR Association Publish Survey on Attitudes Towards the FSA Remuneration Code

City firms fear that the new FSA Remuneration Code will make it more difficult to attract and retain talent in London according to a PA Consulting Group and City HR Association survey of senior executives from 50 UK and international banks. 52 per cent of respondents feel the Code will make it more difficult to attract talent into London and 58 per cent express the view that the Code will make it easier to attract talent away from London and as a result 82 per cent of decision makers at banking institutions are predicting that the Code will risk weakening UK competitiveness. These findings support the FSA’s own prediction in its cost-benefit analysis for the Code that it “could also adversely affect UK competitiveness, as firms subject to this requirement may find it more difficult to compete for talent on a global basis”.

The survey also demonstrates that firms are taking the Code seriously and most institutions confirm that they have already implemented changes to comply with the new requirements. While most bankers will see little change in the way they are paid it is clear that the Code is changing the way senior bankers are paid.

Stephen Brooks, specialist in people management at PA Consulting Group, says: “The objective of the Code is to sustain market confidence and promote financial stability. To be fit for the future and meet the needs of the regulations, banks are changing pay structures for the most senior bankers and many expect to increase base salaries to re-balance the total reward package as a result of bonus deferrals and issuance of stock.  

“However, there is also a clear expectation that the Code will make it more difficult to attract and retain talent in the UK and that this will lead to a loss of competitiveness for the City.”

Other headline findings from the survey:

Not clear that the Code will reduce risk taking

The principal objective of the Code is to change attitudes and behaviours towards risk, however only 34 per cent expect the Code to have a beneficial effect within the industry.  When asked about the effect on attitudes in their own organisation, less than a third (30 per cent) expect the Code to have a beneficial effect and almost half of respondents were unable to decide whether the effect would be beneficial or not.

The finding on attitudes to risk is supported by the responses to questions on whether banks expected to make significant changes to performance management processes. Only 17 per cent expect to make changes, whilst 59 per cent are clear that they do not anticipate any changes.

Stephen Brooks comments: “Most institutions take compliance and risk very seriously and view them as critical ‘gateways’ to performance. Failures or shortcomings in compliance and risk management behaviours will often be dealt with immediately through disciplinary procedures rather than awaiting the formal annual performance review process. The survey supports the belief that firms do not believe that the Code will, in any real sense, impact on attitudes to risk and risk taking in the future.”

Compliance is being taken seriously

The survey shows that most banks either already complied with the code or expected to do so by the compliance deadline. 88 per cent of firms reported that they understood what was required of them by the Code, although despite these efforts firms were less confident that their employees, only 54 per cent of those surveyed are confident that their employees understand the Code.

Regulatory burden and costs

There was a high level of agreement that implementation of the Code will lead to increases in administration and the need for significant investment in training, HR systems, processes and governance arrangements - 79 per cent of firms predict that HR reward procedures will require medium to very high levels of development or investment.

For more information visit www.paconsulting.com/fitforthefuture

Notes to the editor

About the survey

The City HR Association, in partnership with PA Consulting Group, invited a range of decision makers in banking institutions to participate in a survey on their preparations, experiences and attitudes towards the FSA Remuneration Code. Responses were received throughout April and May 2011 from 50 institutions, representing UK and international firms from across the investment banking, commercial banking, asset management and retail sectors.

About PA Consulting Group

PA Consulting Group is a leading management and IT consulting and technology firm. Independent and employee-owned, we operate globally in more than 30 countries and transform the performance of major organisations in both the private and public sectors. For more information visit www.paconsulting.com

From initial idea generation and strategy development through to detailed implementation, we deliver significant and tangible results. We have outstanding technology development capability; a unique breadth of skills from strategy to performance improvement, from HR to IT; and strong expertise in communications, media and entertainment, defence, energy, financial services, government and public services, healthcare, international development, manufacturing, transportation and logistics, and water.

About City HR Association

The City HR Association is an independent organisation for HR professionals working in the financial services sector. It provides a range of services including lobbying, representation, best practice development, surveys and training on all topics affecting HR in financial institutions and professional service firms.

www.cityhr.co.uk

For further information, please contact: Laura Hamblin on +44-207-333-6191 or email laura.hamblin@paconsulting.com

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