Risk management roles in financial services organisations may be subject to greater competition as salaries for these positions are increasing amid rising regulatory pressures, a survey by consultancy Mercer has found.

The firm's Pan-European Financial Services Executive Remuneration Survey, which provides base pay and bonus data for senior executive level positions, found that 73 per cent of organisations will increase salaries for internal risk and audit positions.

The data highlights the progress that is being made to reduce the role of short-term incentives in the pay mix in the financial sector, accompanied by increases in base pay and a much greater use of deferred compensation and long-term incentives.

The proportion of base pay for senior positions showed a rise from 25 per cent in 2008 to 34 per cent in 2010 showing that pay is continuing to move away from short-term incentives.

The proportion of long-term incentives in chief executives’ total compensation increased from 36 per cent in 2008 to 46 per cent in 2010, although annual bonuses dropped from 39 per cent in 2008 to 23 per cent in 2010.

The report also notes that there have been widespread reviews of, and reductions in, generous severance pay packages in response to public concern.

“Executive compensation and remuneration committees have endured another year of strong focus and scrutiny by its stakeholders,” said Vicki Elliott, partner leading Mercer’s rewards consulting in the financial services industry.

Roles with responsibility for internal control in the financial sector received notably higher pay increases, with chief risk officers receiving 5 per cent.

“Our data shows that corporate governance processes have been strengthened and pay structures have evolved since 2008. The widespread salary freezes and salary cuts for executives have come to an end and most organisations have gone back to regular salary reviews," said Elliott.

An increasing number of organisations are deferring part of their variable compensation - from 45 per cent of companies in 2009 to 67 per cent in 2010. The average period for a deferred bonus is now three years with the mandatory minimum according to regulatory requirements. The majority of organisations have a deferral setup with a clawback structure, which allows an organisation to take back previous performance-based payments on the basis of restated financials or breached agreements.

Finally, for 2011 30 per cent of organisations forecast higher bonus pools compared to the previous year, while 60 per cent expect no change.

The data was compiled from 38 insurance, banking and financial services organisations across western Europe.