Monday, 03 February 2014 09:38
Tyrie wants "deep cultural change" over sales incentive schemes
The chairman of the Treasury Select Committee has called for "deep cultural change" over banking sales incentive schemes after serious failings at Lloyds.
Andrew Tyrie MP has written to the Financial Conduct Authority saying it is crucial that regulators make the Banking Commission's recommendations work.
He told FCA chief executive Martin Wheatley he wants to see more action.
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He said: "Banks have rewarded poor behaviour, causing losses to their firms, their reputations and their customers. 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. Deep cultural change is needed."
He identified the commission's proposals for reforming remuneration and accountability as particularly important and said it is vital regulators make these work.
The Prudential Regulation Authority will launch a consultation in April on changes to the current remuneration code but this is not sufficient to address all the problems of misaligned incentives, Mr Tyrie said.
The remuneration code applies only to staff deemed to be 'Material Risk Takers' – which does not extend to sales staff in retail banks.
Mr Tyrie said: "The Banking Commission also made clear that it wanted specific provisions empowering the regulator to limit the use and scale of sales-based incentives to prevent the kind of conduct failure outlined in the Final Notice.
"So far, the FCA has shown little enthusiasm for taking such action. Following the record fine levied against Lloyds, it should reconsider.
"Unless such issues are addressed now, the risk of conduct failure at some point in the future can only increase."
Andrew Tyrie MP has written to the Financial Conduct Authority saying it is crucial that regulators make the Banking Commission's recommendations work.
He told FCA chief executive Martin Wheatley he wants to see more action.
{desktop}{/desktop}{mobile}{/mobile}
He said: "Banks have rewarded poor behaviour, causing losses to their firms, their reputations and their customers. 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. Deep cultural change is needed."
He identified the commission's proposals for reforming remuneration and accountability as particularly important and said it is vital regulators make these work.
The Prudential Regulation Authority will launch a consultation in April on changes to the current remuneration code but this is not sufficient to address all the problems of misaligned incentives, Mr Tyrie said.
The remuneration code applies only to staff deemed to be 'Material Risk Takers' – which does not extend to sales staff in retail banks.
Mr Tyrie said: "The Banking Commission also made clear that it wanted specific provisions empowering the regulator to limit the use and scale of sales-based incentives to prevent the kind of conduct failure outlined in the Final Notice.
"So far, the FCA has shown little enthusiasm for taking such action. Following the record fine levied against Lloyds, it should reconsider.
"Unless such issues are addressed now, the risk of conduct failure at some point in the future can only increase."
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