FSA warns banks over bonuses

| November 21, 2012
FSA warns banks over bonuses

Banks have been warned by the financial watchdog that this year’s bonuses should reflect the recent scandals that have rocked the banking industry.

According to The Financial Times, Andrew Bailey of the Financial Services Authority wrote to banks’ chief executives in October, saying that bonuses should be forfeited or reduced for those involved in payment protection insurance mis-selling and Libor rate rigging.

Under clawback rules, banks can reduce or cancel bonuses that have been awarded but not yet paid out.

Directors at Yorkshire and Clydesdale Banks have had their bonuses cancelled after the banking group recorded big losses.

Chief executive David Thorburn and executive director John Hooper will receive no bonuses this year.

Last year they received bonuses of £320,000 and £515,000 respectively.

Clydesdale Bank Group, which is owned by National Australia Bank, has made a £220m provision for PPI mis-selling and has also been adversely affected by the economic downturn and losses on commercial property loans after property values plummeted.

The real estate lending business has now been passed on to the books of its Australian parent company.

Yorkshire and Clydesdale banks recorded a pre-tax loss of £183m in the year to the end of September 2012, their first ever annual loss, however they said this would have been a profit of £148m if the commercial property operation had been divested earlier.

Despite difficulties in its UK operations, National Australia Bank’s profits fell just 0.5 per cent to A$5.4 billion (£3.5 billion).

Excluding the UK business, National Australia Bank recorded profit growth of more than 9 per cent.

In April, National Australia Bank announced a major restructuring of the UK businesses which is expected to return the banks to profitability.

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