5 years after the beginning of the financial crisis, the banking sector is now facing more close examination than ever before.
The banking system was saved from collapse by billions of pounds of taxpayers’ money, which in turn led to anger that the public had to bail out bankers, who were perceived as risk-taking and “greedy”. People wanted to see bosses held to account and a system introduced which would ensure this could not happen again. So what has actually changed?
Banks came under fire from taxpayers, shareholders and regulators over their pay policies, with bumper bonuses seen as “reward for failure”. In December 2010, European regulators announced tough restrictions on the bonuses that banks can pay their staff. The rules meant that bankers could receive only 20-30% of their bonuses in immediate cash. The guidelines required banks to defer 40-60% of bonuses for three to five years and pay 50% of bonuses in shares (rather than cash), set a maximum bonus level as a percentage of an individual’s basic pay, and publish pay details for “senior management and risk takers”.
Regulators have also encouraged banks to “claw back” pay – reclaiming compensation if an individual’s performance is later not deemed worthy of the pay.