Parliamentary Commission on Banking Standards
We analyse the recommendations on bank remuneration

 

The Parliamentary Commission on Banking Standards has published its report on the UK banking sector, “Changing banking for good”. This hard hitting report covers a range of topics, but the Commission’s view on the role of pay is clear: “remuneration lies at the heart of some of banks’ biggest problems.”

In our analysis, we find that the recommendations in relation to remuneration go beyond existing regulation. We believe that the recommendations are, for the most part, sensible and the Commission has largely avoided headline grabbing but unworkable proposals. But focusing on the structure of remuneration is unlikely in itself to achieve the culture change that the Commission is looking for.

In our analysis we review the key themes emerging from the report including:

  • A new Remuneration Code
  • Power for regulators to impose up to ten year deferral
  • Enhanced malus requirements
  • Greater use of bail-in bonds for remuneration
  • Development of regulatory requirements on risk-adjustment
  • Enhanced disclosure of individual pay, remuneration by division, and link between pay, performance and risk
  • Power to cancel all unvested deferred awards, unvested pension rights, and loss of office payments for banks in receipt of Government support

The full proposals concerning remuneration are summarised in our analysis.

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