Banks operating in London have been warned by the Financial Services Authority that this year’s staff bonuses must reflect the mis-selling and market manipulation scandals that have damaged the sector in the past 12 months.
The Daily Telegraph reports that in a letter from Andrew Bailey, head of the Financial Services Authority’s prudential business unit, the regulator warns British and foreign banks that it expects to see widespread bonus restraint.
This is to reflect the damage done from various scandals that have seen Barclays fined for rigging Libor and Standard Chartered accused of helping fund terrorism. HSBC has set aside $1.5bn for potential fines over links to Mexican money-laundering and the widespread misselling of payment protection insurance.
Visiting Professor Chris Roebuck of Cass Business School, said: 'The pressure on banks to 'curb bonuses' to reflect the mis-selling and market manipulation scandals is understandable - but there is a deeply disturbing sting in the tail.
'Bankers involved in wrongdoing should be severely penalised, that's common sense. But the idea that all bonuses should be reduced is a new departure for the FSA, and indeed any regulator. Are we really saying that if you did a perfectly legal and professional job all year, and made money for your organisation, that your pay should be slashed because someone else did something wrong ?
'No doubt the banks will be in for a rough time this bonus round. In the current mood almost any bonus is deemed unacceptable despite the fact that the concept of performance related pay is key to business success....Making everyone suffer if a few people have done something wrong is neither equitable nor good business practice'.
FSA tells City banks to claw back bonuses