Fearing a talent drainThe Bank of England (BoE) has proposed that, from 1 January 2015, bonuses could be clawed back from bankers who are guilty of misconduct up to seven years after they are first awarded. The proposal is part of the
new remuneration code for bankers drawn up by the Bank’s Prudential Regulation Authority.
Speaking to
FTAdviser, Rob Moulton of law firm Ashurst said the BoE’s requirements will create the toughest deferral regime in the world. He acknowledged that the proposal is in line with the political mood but worried it would affect London’s ability to compete for banking talent.
"Reversing the burden of proof on senior managers so that they are 'guilty until proven innocent' could result in top talent opting out of senior roles," he commented. "Combined with tighter rules around remuneration, this may have the exact opposite effect the UK Government was trying to avoid by fighting the EU bonus cap."
FTAdviser piece Cultural shiftAt least one prominent banker was broadly supportive of the plans, however, reports BBC News. Barclays Chief Executive Antony Jenkins, himself tasked with turning around the culture at the British banking giant, was measured in his response, saying wrongdoing should be punished appropriately: “I believe banks have to regulate themselves and that’s why culture is so important, so that banks do the right business in the right way.”
Jenkins added that in principle, he supports the idea that where there is wrongdoing, there should be appropriate punishment. "If that's criminal wrongdoing, it should be criminal, if it's recklessness, that should be punished also, so I'm not against the concept of clawback," he said.
BBC News story Global problemRachel Savage of
Management Today was also supportive of the BoE’s tougher stance on bankers’ bonuses, but wondered, somewhat gloomily, how effective the measure would be if the UK was the only country willing to adopt it.
Although Savage described increasing the cost of risk-taking and getting senior bankers to tighten up their chain of command as being “actually quite sensible”, she warned: “Unless similar rules apply to everyone everywhere, they won’t stop foolhardy behaviour simply shifting to where it’s less tightly regulated. The UK may be an island, but the sea can’t stop the tide of another global financial crisis.”
Management Today article
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