FSA tells banks to scale back bonuses

Andrew Bailey BBA Conference 2012 480

The FSA has warned banks staff bonuses awarded this year should reflect the recent scandals of payment protection insurance misselling and Libor manipulation with bonuses clawed back from those involved.

The Financial Times reports that FSA managing director of prudential regulation Andrew Bailey (pictured) wrote to bank chief executives late last month to urge them to consider firm-wide bonus reductions to account for recent scandals that have damaged the financial services sector.

The letter was sent to UK banks and global banks with a significant presence in the UK.

Bailey wrote: “Ex-post risk adjustment will be a major area of focus in our 2012 review of the firm’s remuneration policies.

“Firms should also forfeit or reduce current year’s bonuses if appropriate.”

Banks have so far set aside over £10bn to compensate customers who were missold PPI. In June Barclays was fined £290m by the FSA and US regulators for manipulating Libor.

A senior banking sector adviser told the FT: “All of those scandals have really rocked the boat at bank boards. They have changed attitude over the summer and realised they have a cultural problem and that pay is a big part of it.”