Carney Says Hitting Bank Pay Is Regulators' Best Tool
(Bloomberg) -- Bank of England Governor Mark Carney said tough oversight of bankers and threats of jail aren’t enough to prevent talent from joining the industry.
Carney was discussing the U.K.’s Senior Managers’ Regime, a response to the “relatively limited consequences” for senior bankers in the wake of the financial crisis. It works on the basis that ignorance is no defense, and makes managers responsible for anything that happens on their watch. He said that the best weapon to improve behavior is hitting pay packets.
“If you have people doing the wrong thing and they’re not being overseen, they haven’t been trained, no remedial action, it will have consequences for compensation. And of course if it’s more serious, then it will be broader,” Carney, who is a former chair of the global Financial Stability Board, said on a panel at the World Economic Forum in Dav’s, Switzerland.
Asked if all this will stop “bankers being bankers,” he said: “It’s a total bluff” by people in the industry, though he added that it may still happen “on the margin.”
“Where it really hits is on deferred compensation and the ability for it to be clawed back,” he said. “Retaining that attitude and application over time as the memory of the crisis fades, that will be one of the big tests of the political reaction to this.”
Carney is due to leave the BOE next year. In an interview in Davos Friday, U.K. Chancellor of the Exchequer Philip Hammond said the government is open to hiring another foreigner to replace him.
©2019 Bloomberg L.P.