UK's Carney: Curbs on Bankers' Fixed Pay May be Needed
Authorities may need powers to regulate the fixed pay of bankers as well as their bonuses, the Bank of England governor said Monday amid concern the current pay regime does not deter misbehavior.
In the latest scandal to hit the sector, six global banking giants were slapped with $4.2 billion in fines last week for trying to manipulate foreign exchange markets.
"The succession of scandals means it is simply untenable to argue that the problem is one of a few bad apples," Mark Carney said in a lecture in Singapore organised by the city-state's central bank, the Monetary Authority of Singapore.
"Standards may need to be developed to put non-bonus or fixed pay at risk," he added.
Bonuses are already governed by guidelines under the Financial Stability Board (FSB), a watchdog that includes all of the G20 economies, including mandatory deferrals and clawbacks when bankers are found guilty of misconduct.
But there are concerns that major banks could sidestep the restrictions on bonuses by raising fixed salaries.
Giving regulators powers also to control fixed income will "ensure that the burden of excessive risk-taking and misconduct by staff can still be borne by those staff", said Carney, who is also the head of the FSB.
Carney said repeated misconduct in the sector despite the threat of heavy fines "underscore that financial penalties alone are insufficient to address the issues that have been raised".
"Fundamental changes are needed to institutional pressure, to compensation arrangements and to markets," he added.
"We think that leaders and senior managers must be personally responsible for setting the cultural norms of their institutions."
A British parliamentary group on Monday urged action to regulate banks after last week's hefty fines slapped on European and U.S. lenders for their role in manipulating the $5.3 trillion-per-day forex market.
Among its recommendations were the ring-fencing of banks' retail operations from their risky investment arms, and the cancellation of bonuses when serious misconduct emerges.
About 40 percent of global forex trading takes place in London.
Other scandals that have hit the banking sector include rigging of the Libor interbank rate and product mis-selling.
Excesses in the sector, including major U.S. banks, also triggered the 2008 global financial crisis and subsequent worldwide recession.
Source: Agence France Presse
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