Good bankers don’t need to be incentivised

Financial Adviser

There is a continuing view from certain sectors that to criticise the lack of ethical governance around most of our retail banks is to be banker bashing.

Of course, it is a view held by those whose ethical compass appears to lack direction and who are prepared to ignore the vast swathes of evidence-based cases building against the banks. This ranges from the mis-selling of payment protection insurance, the bullying of small businesses into ‘investing’ in swaps, the Starsky and Hutch behaviour of the sections of banks responsible for defaults, to the outright shambles of the Co-op Bank.

If, however, most people are prepared to turn a blind eye to the way that corporates deal with their banks, they are not, however, prepared to do so when it comes to ordinary account holders.

Article continues after advert

We have witnessed the Libor scandal, which has not in any way impacted the number of allegations of attempted market manipulation. So far, the Serious Fraud Office has confirmed that at least 22 people are under investigation on suspicion of market manipulation.

At the low-level branches, almost everyday we get news agency copy flowing through about some rogue front officer clerks and their back office colleagues trying to defraud account holders, usually the elderly, of tens of thousands of pounds.

This aside, something is seriously wrong when a bank can pay its staff a higher bonus than its shareowners get as dividends. Or, put another way, when senior directors of a bank can set aside a greater part of profits to incentivise each other than that set aside for the owners of the business we have to ask ourselves who really owns the bank.

The suggestion that good bankers must be incentivised on a level to compete with rivals in Frankfurt, Singapore or New York is flawed. In the case of Barclays Bank, some reports have indicated that shareholders are unhappy with this turn of events. This policy is based on the belief that good investment bankers are hard to find and to lose star performers would mean losing business.

Yet we are told that most investment houses no longer depend on star performers but on teams and good research, and no doubt, good training and succession planning.