Make bankers wait longer for the bonuses
The Bank of England, under Mervyn King, has been a powerful and forensic opponent of bankers’ bonuses. That’s one of the reasons I fear the appointment of Goldman Sachs alumnus Mark Carney will be a step backwards.
Well, if the end is beckoning for the Bank’s crusade, let’s make the most of it while we can.
There was powerful point on remuneration hidden in last week’s Financial Stability Report.
We all know that bankers have graciously agreed to defer their bonuses rather than trouser the cash at the end of the financial year. But as this chart from the FSR shows, the typical 3 to 5 year deferral period that bankers have accepted is, rather conveniently, shorter than the average credit or business cycle.
The justification for deferring bonuses is to incentivise bankers to take more care over the risks they take.
What this research shows is that a three to five year bonus delay just isn’t long enough to perform this job.Tagged in: bank of england, financial stability report, Mark Carney
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