UK lawmaker calls for limits on retail banking incentives
LONDON (Reuters) - Britain's banking regulator should be given new powers to limit the use and scale of the kind of sales-based incentive schemes that led to Lloyds being fined record sums for mis-selling products, an influential lawmaker has said.
Andrew Tyrie, chairman of the parliamentary committee that scrutinises the country's finance ministry, said on Monday he had written to the regulator to urge changes to the way retail banking staff were remunerated.
The issue of how bankers are paid, and whether this leads to them taking on too much risk, has become a hot topic since the financial crisis in 2008. The focus has mostly fallen on senior executives or traders, but Tyrie said such scrutiny needed to extend to retail banking staff because they too could bring increased risk to the system.
Lloyds Banking Group, which is trying to burnish its image and bolster capital levels before the sale of the government's remaining 33 percent stake in the lender, was fined 28 million pounds in December for the way it encouraged staff to sell products to customers who did not need them.
The probe, which covered the sale of products such as critical illness or income protection, uncovered such incentives as the chance to win a one-off payment, known as a "grand in your hand" or a "champagne bonus".
Tyrie, in a letter to the head of the Financial Conduct Authority (FCA), Martin Wheatley, said 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," he said. "Deep cultural change is needed."
Tyrie said the FCA had so far shown little enthusiasm for taking action against the use and scale of sales-based incentives, but that it should now reconsider in light of the record Lloyds fine.
"Unless such issues are addressed now, the risk of conduct failure at some point in the future can only increase," he said.
The call by Tyrie and the reference to the record fine is likely to overshadow an announcement by Lloyds, also released on Monday, about how it intends to help communities in Britain prosper through a raft of proposals including increased lending to smaller companies, first-time buyers and charitable foundations.
The bank said Chief Executive Antonio Horta-Osorio would use a speech on Tuesday to set out a list of commitments which would also include a pledge to fill 40 percent of senior roles with women.
"The reputational impact of the financial crisis upon the banking industry's stature has been immense," he said in a statement released ahead of the speech. "Rebuilding a sound reputation founded on the highest standards of responsible behaviour is key to the industry's long term success."
- Tweet this
- Share this
- Digg this
- Rebound in FTSE halted by drop in BT and commodity stocks
- Ukraine gas supplies in doubt as Russia seeks EU payment deal
- Maine nurse fights Ebola quarantine, says will not be bullied |
- Kurdish convoy heads to Syria to take on Islamic State |
- For 23rd time, U.N. nations urge end to U.S. embargo on Cuba |