Lloyds’ chair elect backs clawbacks in banker pay

September 10, 2009

LLOYDS/    By Huw Jones
   LONDON, Sept 10 (Reuters) – Clawbacks would help tackle public concern over bank bonuses, as would deferring parts of a pay package, said Win Bischoff, incoming chairman of Britain’s Lloyds Banking Group <LLOY.L>.
   Bischoff, who will take up his new role at the part-nationalised bank on Sept. 15, backed clawbacks for use when good performance by a trader or senior manager turns out to have been illusory.
   “I think the clawback mechanism is actually quite useful,” Bischoff told a Business for New Europe event on Thursday.
   Bankers’ pay and bonuses have sparked anger in many countries after governments were forced to prop up the sector with billions of dollars of taxpayer cash at a time of rising unemployment.
   Finance ministers from the G20 group of countries agreed at the weekend to strengthen curbs on bankers’ pay to stop overly generous bonuses encouraging reckless behaviour.
   The use of clawbacks was among the elements adopted, though there was no consensus on imposing actual limits on pay.
   Bischoff said deferring part of a remuneration package could also be used at the trader and senior management levels.
   “As to senior members of management being paid largely in shares — and those shares being deferred — as a concept I think it’s right,” Bischoff said.
   Such steps don’t necessarily fully protect a company, as was the case with U.S. bank Lehman, which crashed, Bischoff said.
   The suggestion from Britain’s Financial Services Authority that banks who take more risks should hold more capital was also “quite important”, Bischoff said.
   “Ultimately, managements… are very highly influenced by the returns on capital. If you have to have higher returns on capital then you would probably use a more clawback-based mechanism in any case,” Bischoff said.
   David Arculus, who wrote a review on economic competitiveness for Britain’s opposition Conservative Party, said a new “Chelsea FC” type rule was needed to crackdown on poaching of banking staff.
   “I think the present legal structure is not working,” Arculus said.
   Chelsea Football Club were this month banned from buying any new players until 2011 after being found guilty of poaching a young French player, by inducing him to break his contract with another club.
   Britain’s financial services minister, Paul Myners, said there were already provisions to crackdown on inducements to break contracts and that legislation was unnecessary.
   Myners said he has asked the FSA for “granularity” on how it would link risk to remuneration and capital charges at banks.
   Bischoff also criticised FSA Chairman Adair Turner for saying that Britain’s competitiveness should not necessarily be uppermost in mind when it comes to making new financial rules.
   Leaders in other countries were “mystified” and asking “why on earth we would be undermining our own advantages,” Bischoff said.
 (Additional reporting by Steve Slater; editing by Simon Jessop)
 ((Reuters messaging: huw.jones.reuters.com@reuters.net; + 44 207 542 3326; huw.jones@thomsonreuters.com))
 Keywords: BANKS LLOYDS/BONUSES
  
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 Thursday, 10 September 2009 13:20:33RTRS [nLA21004] {EN}ENDS

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