Former chancellor Lord Nigel Lawson says it is “absurd” to believe free banking has led to misselling as he calls for the Bank of England to have a veto over banks’ sales incentive schemes.
In an interview with Money Marketing, the Conservative peer says misaligned bank sales incentives have led to misselling and bad lending which has characterised the banking system for the last 20 years.
Lord Lawson, who was Margaret Thatcher’s reforming Chancellor from 1983 to 1989, said he did not predict the scale of misselling scandals that came following his time in office.
The peer, who also sat on the parliamentary commission on banking standards, said scandals occurred because of FSA failure and a “sad decline” in moral and cultural standards.
The banking commission called for an overhaul of the remuneration code with far greater FCA scrutiny over schemes.
Lord Lawson says: “[Sales incentives] have indeed been a problem – which has led not only to misselling but also to bad lending, a major cause of the banking crisis from which we are slowly emerging, at considerable expense to the taxpayer and the economy in general.
“As the report of the PCBS makes clear, the supervisory and regulatory authorities, essentially the Bank of England, need to take an active role in approving or not approving the structure – much more important than the level – of bank remuneration.”
Essential IFA managing director Peter Herd says: “Regulators should take a lot more interest in sales incentive schemes. All institutional misselling scandals have their roots in bonus schemes so tackling these schemes is crucial to tackling banks’ culture.”