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FSA tells banks to claw back bonuses

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FSA tells banks to claw back bonuses

The Financial Services Authority (FSA) has told British and foreign banks operating in the City that it will expect them to show they have clawed back bonuses and exercised restraint after a year of major scandals to hit the sector.

In a letter sent at the end of October to senior executives by Andrew Bailey, head of the FSA’s prudential business unit, and obtained by the Financial Times, the regulator urged businesses to reduce bonuses across all operations, to demonstrate the seriousness of the failings revealed.

Barclays was fined £290 million over its role in the Libor manipulation scandal and HSBC has set aside £950 million to settle failings in its global money laundering controls.  

Lloyds set aside a further £1 billion last week to settle compensation claims related to PPI mis-selling, bringing its total compensation provisions to £5.27 billion.   

‘Ex-post risk adjustment will be a major area of focus in our 2012 review of the firm’s remuneration policies,’ wrote Bailey. ‘Firms should also forfeit or reduce current year’s bonuses if appropriate.’

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