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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2011/01/bank-bonuses-to-undergo-overhaul.jpg"><img class="alignnone size-full" title="The Financial Services Authority is planning a shake-up of bank bonuses" src="http://londonglossy.com/wp-content/uploads/2011/01/min-bank-bonuses-to-undergo-overhaul.jpg" alt="The Financial Services Authority is planning a shake-up of bank bonuses"/></a></p>
<p>Bank bonuses are set to undergo a radical change as the industry responds to a raft of new rules on the issue, it has been reported.</p>
<p>Institutions are looking at ways of linking the payouts to customer satisfaction, and how much capital banks have built up, rather than basing them on share price performance and profitability as has been the case in the past, according to the Observer newspaper.</p>
<p>All of the major banks, including Lloyds Banking Group, Royal Bank of Scotland, HSBC and Barclays, are understood to be in discussions with major City investors about what the new performance criteria should be, with some groups also considering including targets on lending to small businesses.</p>
<p>The changes are being driven by City watchdog the Financial Services Authority, which wants to see a clearer link between pay and performance &#8211; including the risks being taken by banks &#8211; in the bonuses they award.</p>
<p>New European-wide rules that came into force at the start of this year also set a new range of targets on which long-term incentive plans must be based.But senior bankers are understood to have appealed to the Government for immediate guidance on how the current batch of year-end bonuses can be paid in the light of all the new regulation.</p>
<p>Representatives from groups such as Barclays, RBS and HSBC, have asked Chancellor George Osborne and Business Secretary Vince Cable for some clear and precise information on what sort of bonus payments will be acceptable, according to the Sunday Telegraph.</p>
<p>Line managers and finance departments at the major banks will be finalising bonus payments based on their group&#8217;s financial performance during the coming few weeks, but the increasing number of varying guidelines is understood to be making the process difficult.</p>
<p>It is thought that City bankers will collectively share a bonus pot worth around £7 billion during the coming two months &#8211; a sum that is likely to spark outrage among hard-pressed consumers and small businesses who are struggling to borrow money.</p>
<p>As well as the new FSA and EU guidelines, the heads of the UK&#8217;s five biggest banks are also involved in ongoing talks with Mr Osborne and Mr Cable over constraining payouts. </p>
<p>Meanwhile, charities have called for a new tax to be levied on bankers&#8217; bonuses to help insulate their organisations from funding cuts. Sir Stephen Bubb, chief executive of Acevo, which represents 2,000 charity leaders in the UK, said such a levy could help prevent thousands of charities from closing or cutting services.</p>
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