“Many bank staff have been paid too much for doing the wrong things, with bonuses awarded and paid before the long-term consequences become apparent. The potential rewards for fleeting short-term success have sometimes been huge, but the penalties for failure, often manifest only later, have been much smaller or negligible,” said the report.
The commission proposes far more deferred remuneration, of up to ten years and in a way that favours long-term performance, such as bail-in bonds.
The Commission suggests broader metrics to measure success or failure and individual claims for remuneration should be deferred or cancelled if wider misconduct emerges or the business suffers a downturn.
If a bank requires direct taxpayer support, its senior persons or licensed individuals may lose any right to remuneration alongside pension rights and other entitlements.
The Commission, appointed in July 2012 after the LIBOR-fixing scandal emerged said no single reform would clean up the industry which had been “eroded by a profound loss of trust.”
However, the commission’s proposals straddle five themes including individual responsibility, better governance, more diverse markets and better discipline, tighter regulatory oversight and clearer lines of government responsibility.
But on individuals, the Commission said too many bankers operated with “insufficient personal responsibility.”
“Top bankers dodged accountability for failings on their watch by claiming ignorance or hiding behind collective decision-making. They then faced little realistic prospect of financial penalties or more serious sanctions commensurate with the severity of the failures with which they were associated,” said the report.
The Commission proposed a senior persons regime with tighter reporting lines, a licensing regime for key personnel and a better code of working practice for bankers, backed up by clear enforcement procedures from the regulator.
For the full Banking Commission report, click HERE
