Wheatley: Review pay rules to stop misselling

Tim Wallace
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TOP BANK bosses will today be told to review pay practices to make sure customers are not being ripped off by unscrupulous sales tactics, as Martin Wheatley unveils his report into mis-selling.

The managing director at the Financial Services Authority (FSA) is not expected to ban commission-based remuneration, but is expected to warn that such arrangements must be structured in a way that benefits the consumer, and not just the sales team’s pay packets.

Wheatley is understood to be concerned that misselling – such as the payment protection insurance debacle, and the interest rate swaps scandal – could in some cases be caused or exacerbated by staff being given the wrong incentives.

As a result, he wants pay structures to be reviewed to make sure staff will not be rewarded for inappropriately pushing products onto the wrong customers.

Banks are already taking action to clean up after the scandals – Lloyds’ boss Antonio Horta Osorio, for example, quickly took steps to compensate burned customers to repair the bank’s damaged reputation, setting aside more than £4bn to cover the costs.

Banks including HSBC, RBS and Barclays have also each pledged over £1bn in compensation payouts as part of the whole industry’s attempt to resolve the crisis.

Today’s report will also look at the wider culture at banks, and offer some guidance to bank bosses as to how they can improve the behaviour at their institutions.

Wheatley is also conducting an investigation into the key inter-bank lending rate Libor in the wake of the manipulation scandal.

That reform will consider how the rate is compiled, the governance around its compilation and how misbehaving banks should be punished in future.

In June Barclays was fined £290m for Libor manipulation, and other banks may also face punishment over the affair.

Wheatley’s powers to govern bankers’ behaviour are set to grow further in the near future – he is set to move from the FSA over to head up the new Financial Conduct Authority when that is established early next year.