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About 17% of Global Banks Clawed Back Compensation, Mercer Says

The Lloyd's of London building, right, reflected in buildings in the financial district of London. Photographer: Frantzesco Kangaris/Bloomberg
The Lloyd's of London building, right, reflected in buildings in the financial district of London. Photographer: Frantzesco Kangaris/Bloomberg

Aug. 23 (Bloomberg) -- About 17 percent of global banks clawed back compensation in 2011 as European and North American regulators pressured firms to impose penalties on employee risk-taking, according to consulting firm Mercer.

The survey found 44 percent of banks had clawback provisions in place before 2011, with them more common in North America than Europe, the Middle East and Africa before that year. However, a further 18 percent of banks have introduced them since then in both regions, it said.

“Clawbacks are relatively new phenomena in compensation programs so it will take some time for them to bed down,” Vicki Elliott, global financial-services human capital leader at Mercer, said in the statement. “A small number of clawbacks doesn’t signify that the sector is ignoring lessons from the financial crisis, but does raise legitimate questions about whether companies will actually seek pay-back of compensation paid.”

The introduction of clawbacks, or taking back compensation, was spurred by the financial crisis of 2008 as governments and regulators came under public pressure to curb bankers’ pay after top executives whose banks collapsed or required government bailouts walked away with hundreds of millions of dollars of severance payments or accumulated pay packages.

In the U.K., Lloyds Banking Group Plc’s former chief executive officer, Eric Daniels, will lose 25 percent of his final bonus as he and four other current and former executives are penalized for improperly sold insurance products, a person with knowledge of the matter said in February. HSBC Holdings Plc said in the same month it has clawed back bonuses for employees because of the mis-selling of payment protection insurance.

The Mercer survey was completed by 63 financial-services firms including banks and insurance firms, it said.

To contact the reporter on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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