Whilst the industry (Bankers) reel over having bonuses clawed back, I begin to ask myself if they really understand the responsibility that they hold?
Making decisions on fixing rates, mis-selling policies and underwriting loans without understanding the underlying risk are all the sorts of activities that got us to where we are now (Lloyds increased its PPI provisions by another £600m today). They are
all the sorts of activities that paid good bonuses.
Is the proposed treatment too harsh though?
- The 7 year deferral of future bonuses is tough start point, much higher than the 3 year typical timeframe in the rest of the world.
- The 7 year historic clawback for wrongdoing is a bit worrying, particularly for anybody thats (mis)spent their bonuses and gets called up - this could be catastrophic. But this only applies to bonuses awarded after Jan 2015.
- Wreckless behaviour in financial dealings leading to a criminal conviction - requires a more objective and evidence based approach, rather than the catch-all that it appears to be at the moment.
Whilst there have been a slew of regulatory and legislative sticky tape applied since 2007, this one has the underpinnings of something that would reflect good working practices and the benchmark for where the industry should be.
It does appear that the Monk need not worry just yet.