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.”
Read our full coverage of the Banking Commission’s final recommendations: