Senior executives in the investment banking sector should be forced to wait between five and ten years to cash in their bonuses in full, according to The Future of Banking Commission.
The cross-party commission, whose members include business secretary Vince Cable, has recommended remuneration structures should be much longer-term in nature, with reward for financial measures aligned to a return on assets and the creation of sustainable shareholder value.
The commission's report also stipulated that reward for senior executives in the retail banking sector should be linked to customer measures including overall satisfaction, complaint levels and their fair resolution and regulatory compliance. Details of these measures should be made available on the bank's website.
It has also been recommended that remuneration for frontline and branch staff should not be linked to sales, and should instead reward customer satisfaction.
In the interim, the Financial Services Authority (FSA) should make it clear that institutions that do not adopt this rule will be closely scrutinised, and senior management will be subject to enforcement action for any remuneration structures or sales targets which contribute to mis-selling by putting excessive pressure on frontline staff.
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