Hector Sants has said on the BBC's Andrew Marr Show that the issue of bonuses is one for 'politicians and society as a whole'
The head of the financial watchdog has admitted that it could not control bonus payments to individuals in banks and City institutions.
Speaking on BBC One's Andrew Marr Show, Hector Sants said it was not the job of the Financial Services Authority to restrict bonuses.
"The question of the size of individual payments is not one for the regulator," he said. "That is one for politicians and society as a whole."
Sants, who is preparing to publish the FSA's guidance on pay and bonuses in the next few days, said: "Our job is to make sure that banks in their compensation policies do not put those institutions at risk, which is what happened in the past."
Ministers pledged to take action to prevent bankers and City traders returning to the kind of huge, risk-fuelled bonuses widely blamed for bringing the world's financial system to its knees last year. Last week, evidence that Barclays and other banks would be paying staff six-figure bonuses as the banks' investment divisions returned to profit, has increased fears that the City has returned to old habits.
However, Sants said he "would not expect" banks to agree year-on-year guaranteed staff bonuses.
He said: "We are publishing our code this week which will clearly lay out the bounds of how these bonuses are distributed."
Banks will be obliged to "clearly articulate" their pay and bonus policies under the code and those who do not could be forced to hold more capital on their balance sheets, he said.
But he added that while bank pay policies "in aggregate" came under the FSA's remit, the question of individual payments to staff was "one primarily for the shareholders" rather than the regulator.
The chief executive said the economy was "still very difficult", but added that the worst stages of the crisis – which threatened some banks' very survival – had passed.
"From a financial stability point of view we are now comfortable that we now have a stable position," Sants said.
Copyright Speakers Corner 2017