Carney: Bank bonuses to face 5 year delay
BANKERS could have to wait for more than five years to collect their bonuses under new rules being considered by the Bank of England, governor Mark Carney revealed yesterday.
And the Bank’s prudential regulation authority is considering ways to claw back bonuses even after they have been paid out, if bankers have behaved badly or made losses years after the pay was awarded.
The consultation comes after MPs and peers on the Parliamentary Commission on Banking Standards demanded tougher rules on pay.
“The current remuneration code requires firms to cancel or reduce deferred variable remuneration (i.e. bonuses that have been awarded but not yet paid out) in cases of misconduct, poor performance or failures of risk management,” Carney said in his letter to Andrew Tyrie MP.
But it “does not, however, require firms to recoup bonuses that have already been paid out (claw back).”
The consultation will launch this month and conclude in around two months, he said.
But some of the politicians’ plans to punish bad bankers may be impossible to implement.
Bankers can accrue pension rights with their pay and bonus packages, and Carney fears cutting those pension rights when bonuses they are based on are clawed back may break other EU and UK rules.
It came as the European Commission approved rules identifying the top bankers which it wants to target with its incoming bonus cap.
Meanwhile the City watchdog warned that one in ten retail banks are still offering sales staff inappropriate pay incentives. Much of the sector has reformed in the wake of the PPI mis-selling scandal.
But the Financial Conduct Authority said banks need to use more balanced scorecards, which pay staff based on customer outcomes as well as sales, and they need to monitor suspicious spikes in sales.