Regulator urged to take hard line on bank staff bonuses
Andrew Tyrie, chairman of the Treasury Select Committee of MPs, called for “deep cultural change” on incentive schemes in a letter to the chief executive of the Financial Conduct Authority (FCA).
In December, Lloyds Banking Group was fined £28 million for “serious failings” on its bonus schemes.
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Hide AdA highly critical report from the Financial Conduct Authority said staff had been threatened with demotion and pay cuts for failing to meet sales targets.
In one case an adviser was found to have sold products to himself, his wife and a colleague.
Lloyds accepted the findings and apologised to customers.
Mr Tyrie said: “Banks have rewarded poor behaviour, causing losses to their firms, their reputations and their customers. In some cases, remuneration structures encouraged behaviour which added great risk to the financial system.
“Incentives have been deeply misaligned for significant numbers of front-line staff, not just highly remunerated traders or the most senior executives.
“Deep cultural change is needed.”
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Hide AdMr Tyrie said the Banking Commission, set up following the credit crunch and which he also chaired, had recommended specific measures to limit the scale and use of sales-based incentives such as those that resulted in the fine for Lloyds Banking Group.
“So far, the FCA has shown little enthusiasm for taking such action. Following the record fine levied against Lloyds, it should reconsider.
“Unless such issues are addressed now, the risk of conduct failure at some point in the future can only increase,” he said.
Mr Tyrie’s letter comes ahead of a hearing by the Treasury Select Committee tomorrow when the FCA’s chairman and chief executive will be grilled by MPs.
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Hide AdThe FCA has previously said its code governing pay applies to “material risk takers” whose actions can put a financial institution at risk and “applying the code to other individuals would go well beyond the international standards on remuneration”.
It has, however, also said it will consider the need for “high-level remuneration principles for UK staff”.