Bank of England plans to get tougher on rule-breaking banker bonuses
LONDON – The Bank of England has proposed a new rule for recovering bonuses of rule-busting bankers who have moved to a new employer.
Britain already has among the world’s toughest rules on banker pay, introduced amid public anger over lenders being bailed out by taxpayers in the financial crisis and bankers pocketing big payouts at a time of austerity for most people.
These rules allow for a bonus to be cut, stopped or clawed back.
But regulators said on Wednesday they wanted to go further to crack down on so-called “rolling bad apples” or bankers who pocket a bonus and then join another lender before any reckless behaviour is uncovered.
“Individuals should be held accountable for their actions and not be able to actively evade the consequences of their actions,” Bank of England (BoE) Deputy Governor Andrew Bailey said in a statement.
“Today’s proposals seek to ensure that individuals are not rewarded for bad practise or wrongdoing and should help to encourage a culture within firms where reward better reflects the risks being taken,” said Bailey, who also heads the BoE’s banks supervisory arm, the Prudential Regulation Authority.
The proposed new rule targets buyouts, or when a bank compensates new employees for unpaid bonuses that were cancelled when they left their old bank.
Regulators say that undermines the ability to claw back a bonus which has been paid or withhold or cut the unpaid portion of a bonus, when misconduct is later discovered.
The proposed rule states an employee’s new contract would allow for a bonus to be recovered or not paid should the person’s former employer determine guilt in misconduct or risk management failings.
“The proposed rules would also allow new employers to apply for a waiver if they believe the determination was manifestly unfair or unreasonable,” the BoE said.
The proposals, put out to public consultation, would make it impossible for a banker to wipe the slate clean by changing jobs, said Alexandra Beidas, an employment lawyer at Linklaters.
“It remains to be seen if this will be workable in practise as it will involve sharing potentially sensitive information between banks,” Beidas said.
Last year, the BoE said it would stop short of actually banning buyouts as it would most likely lead to a competitive disadvantage for British firms given there is no similar rule in other financial centres around the world. -Reuters