View more on these topics

Banking commission: FCA needs new code to tackle bank pay

UK-Currency-Money-Pounds-Notes-700x450.jpg

The parliamentary commission on banking standards is calling on the Financial Conduct Authority to introduce a new remuneration code to curb bank executive pay and sales incentive schemes.

The commission’s final report, published this week, says sales incentives have contributed to misselling scandals such as payment protection insurance.

The cross-party panel welcomes moves by major banks such as Barclays, Lloyds Banking Group and the Co-operative Bank to ban sales incentives, but adds there have been “widespread warnings” that sales-based rewards may persist informally.

The commission recommends the new code contains an FCA power to limit or ban the use and scale of sales-based incentives at individual or business unit level. 

It says the code should allow regulators to tackle the risk-based features of senior bank bonuses by requiring a “substantial part” to be deferred for up to 10 years to promote long-termism and allow clawback over future problems. It also calls for more transparency over how senior pay is calculated, with greater FCA scrutiny.

The FSA launched a crackdown on sales incentives last year after a 12-month investigation.

Jacksons Wealth Management managing director Pete Matthew says: “By making bank incentive structures longer term it should remove the short-termism which has driven so many bad decisions.”

Recommended

Advisers keep a watchful eye for further Cazenove fallout

Cazenove head of European equities Chris Rice is leaving the fund group as advisers keep a watchful eye on any further fall out from the Schroders deal. Rice announced his departure last week after spending 10 years with Cazenove. He will stay with the firm until July when the firm will be acquired by Schroders […]

PosSol reviews True Potential tech deal

Positive Solutions is reviewing its adviser technology after parent company Aegon sold the business to Intrinsic last week. Currently the firm uses True Potential’s front, middle and back office software throughout the business in a deal struck between Aegon and PosSol founder David Harrison in 2007. PosSol uses the TP technology for all adviser software at […]

CPD briefing: Understanding the FCA, VAT on advice and anti-avoidance

  Learning objectives (full list of ApEx standard covered below) By reading this edition of Newsbrief and completing the MCQ test online you will be able to: Keep up to date on the regulatory and market changes that have taken place during May. Understand the aims and direction of the FCA. Understand the basis and […]

9

Lighthouse chief says trail should be left alone

Lighthouse says advisers’ legacy trail should not be switched off as axing the payments rarely provides any benefit to clients.  Chief executive Malcolm Streatfield says advisers have had to implement many changes as a result of the RDR and should be allowed to rely on historic trail to provide part of their recurring income. Streatfield says: […]

Rise of the machines

Head of Sustainable Investing at Royal London Asset Management, Mike Fox, looks at the case for including artificial intelligence within a sustainable investment strategy. Read the article in full here The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Here we go – another rung down the ladder of the Socialist pit.

    Has it not occurred that it’s Economics – stupid. If I employ a widget maker and set him a target to produce 100 per shift and he produces 110, he gets a bonus. If the quality control sees that his widgets are not up to standard, not only does he get no bonus he gets his P45.

    So what’s the difference with Banking? Banks are a business. If an employee contributes to an outperformance creating more profit for the bank and its shareholders shouldn’t he/she be entitled to a share of this bounty? No banker has been paid more bonus than the profit he made or that the bank could afford. What incentive would there be for effort and hard work – or will salaries just be increased to cover – whether or not productivity justifies it? (This of course leads to higher costs for the customers – but who cares about that!)

    What failed was management’s quality control – they produced duff products. And the Factory Inspector (in the form of our regulator) was asleep in the works canteen at the time and didn’t spot the duff products rolling off the production line until it was far, far too late.

  2. @Harry Katz

    Quite. However this is the Zeitgeist. All bankers or indeed anything to do with hypothecation is viewed with suspicion usually by people that are pontificating from a position of complete ignorance.

Leave a comment