Sir John Vickers is facing pressure from senior MPs to widen his work on making banks safer by defining new bonus transparency rules, to provide an early warning of the build-up of risk.
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Tower Bridge and City of London financial district
Members of the Commons treasury committee will next month urge Sir John to ensure that his commission’s final report on Britain’s banking industry contains much tougher scrutiny of the role bonuses play in creating systemic risk.
Andrew Tyrie, Tory chairman of the committee, argues that the Independent Commission on Banking, led by Sir John, must address the issue of pay in its final report in September.
Britain’s banks will argue that they are subject to some of the world’s toughest rules on bonuses and that tougher transparency rules could undermine the UK’s competitiveness as a financial center.
Mr Tyrie said he and fellow MPs would impress upon Sir John at a May 24 hearing that any report on making the structure of British banking safer should insist that the banks be clear where they pay bonuses.
Mr Tyrie argues that such data would have helped regulators spot the risk accumulated by banks before the 2008 crash, in certain sectors such as commercial property and asset backed securities.
“One of the central weaknesses of these institutions appears to be that remuneration structures encourage some of these most disproportionately risky activities,” he said.
Mr Tyrie said banks should provide more information on bonuses to the Financial Services Authority and this could be released into the public domain in aggregated form to protect commercial interests.
The Vickers Commission barely touched the issue of executive pay in its interim report. It focused instead on structural remedies to make banks safer and more competitive.
When Bob Diamond takes the stage at Barclays’ shareholder meeting for the first time as chief executive this week, he is expected to be grilled by the bank’s private investors over his £15 million pay package for 2010.
Last week the Association of British Insurers issued an “amber top” warning over remuneration at Barclays, raising concerns about its bonuses and the fact that Mr Diamond earns 20 percent more than his predecessor John Varley.