Retail banks moving in right direction on bonus schemes says regulator
The Financial Conduct Authority (FCA) has said this morning that all major retail banks have replaced or made “substantial changes” to financial incentive schemes.
“Significant improvements” in weak areas across the industry have been made, it added in its statement this morning, although it found that one in 10 firms with sales teams had "high-risk" bonus schemes and appeared not to be “managing [the risk] properly”.
Martin Wheatley, chief executive of the FCA said:
Eighteen months ago we gave the industry a wake-up call and it recognised that a poor incentive culture had helped push bad sales practice, which led to mis-selling.
We’ve seen some good progress but it is going to take time to see whether the changes firms have made to incentive schemes and their controls stick, and whether good beginnings are part of genuine cultural change.
The FCA is telling firms to focus in on a number of areas, including monitoring trends in sales patterns and to supervise non-advised sales, to make sure staff incentivised to sell don’t give personal recommendations.
Over the past ten months, the regulator has issued financial penalties which total over half what its predecessor, the Financial Services Authority, issued in over 11 years.
Mary Stevens, manager of regulatory analysis Europe at Wolters Kluwer Financial Services, says firms need to continue working hard to ensure they’re fully compliant with requirements.