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Banking commission: FCA needs new code to tackle bank pay


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.”


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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.

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