UK lawmakers critical of bankers’ bonus culture

LONDON – An influential committee of lawmakers said Friday that the bonus culture in the British banking sector encouraged excessive risk-taking that was exposed in the financial crisis.

The report from the Treasury Committee on reform of governance and pay in the financial sector warned that regulators are still not tackling the issue of bankers’ pay as a priority.
The report follows weeks of often heated cross-examination of lawmakers, regulators, banking officials and analysts.
The lawmakers single out the now part-nationalised Royal Bank of Scotland PLC for criticism, saying that its former chief executive Fred Goodwin should have been sacked – rather than allowed to resign with a multimillion pound pension.
‘Bonus-driven remuneration structures led to a lethal combination of reckless and excessive risk-taking,’ said John McFall, the chairman of the Treasury Committee.
‘The design of bonus schemes was not aligned with the interests of shareholders and the long-term sustainability of the banks and has proved to be fundamentally flawed.’
McFall added that the committee was concerned that a government-commissioned report of the crisis, the so-called Turner Review, downplayed the role of remuneration in the crisis.
‘Looking forward, we are also concerned that the Financial Services Authority seems not be taking tackling this issue seriously enough,’ he said.
Prime Minister Gordon Brown backed away from threats of legal action in an attempt to cut Goodwin’s pension – currently valued at 703 000 pounds (US$987,000) a year – under whose leadership RBS piled on debt which later caused its near collapse, partial nationalisation and record losses.
The Treasury Committee also criticised former RBS chairman Paul Myners for failing to provide adequate oversight – or prevent – the agreement that led to Goodwin’s pension. -Nampa-AP