10-year bonus delay for senior bank employees
SENIOR employees at UK banks may face a 10-year wait for bonuses under proposals put forward by a committee investigating the failures of the industry, which also recommended making "reckless" management of lenders a crime.
A "substantial part" of variable compensation for the highest earners at banks, including Barclays and HSBC, should be deferred for up to a decade to better align their interests with shareholders, the UK Parliamentary Commission on Banking Standards said.
Its proposal to introduce a criminal offence for mismanagement, which could see executives of failed firms facing jail time, was endorsed by Prime Minister David Cameron.
"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," the authors of the report said.
Pay reform is part of a programme of sweeping change proposed by the commission, a cross-party group of lawmakers set up after a series of scandals and five years of poor returns for the financial industry. The report called on the UK government to introduce a register for bankers and consider breaking up Royal Bank of Scotland.
While some lawyers criticised the potential criminal offence as unworkable, the committee head Andrew Tyrie said the proposals were better than the plan adopted this year by the European Union over UK resistance. The EU aims to block banker bonuses of more than double fixed pay. (Bloomberg)