Bloomberg the Company

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Follow Us

Industry Products

BOE Tells Bankers Covering Up Bad Behavior to Pay Back Bonuses

Don't Miss Out —
Follow us on:

Nov. 19 (Bloomberg) -- Bankers that fail to report colleagues’ misconduct should be forced to pay back a portion of their bonuses, the Bank of England said as it seeks to rein in practices that tarnished the reputation of lenders.

Banks should penalize staff that don’t “take adequate steps to promptly identify, assess, report, escalate or address” poor behavior by colleagues by taking away some of their deferred bonus awards, the BOE’s Prudential Regulation Authority said in a policy note on its website.

“Risk management failures and misconduct can take years to come to light,” the PRA said in the document, dated Oct. 28. “This should not prevent firms from applying ex-post risk adjustment to the extent that the relevant individuals have variable remuneration capable of reduction.”

Royal Bank of Scotland Plc. this year recouped about 302 million pounds ($486 million) by cutting its bonus pool and clawing back compensation to help meet the 381 million-pound cost of fines in the Libor rigging-scandal. The European Banking Authority is preparing to finalize the world’s toughest bonus rules, which will cap payouts to twice fixed salary.

Clawbacks should also apply to senior managers directly or indirectly responsible for misconduct, the PRA said in the statement, and individuals that are under investigation for wrongdoing should have all of their deferred awards frozen until the probe is finished.

The PRA told lenders to write provisions for clawbacks into the employment contracts with staff and to take into account the costs of fines, financial losses and reputational damage of poor behavior when calculating how much to take back.

To contact the reporter on this story: Ben Moshinsky in Brussels at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.