HSBC chairman backs FSA to act on City bonuses
LONDON, Sept 24 |
LONDON, Sept 24 (Reuters) - The chairman of the largest western bank, HSBC Holdings Plc. (HSBA.L), on Wednesday offered backing to UK regulators seeking to tackle short-termist incentive plans at financial services firms.
Speaking at a seminar on sustainable investment, Stephen Green said: "There is now a growing demand, even within the industry let alone beyond it, for an approach to compensation which is more responsible."
Bonus schemes which reward bankers for short-term gains have been identified as one of the key factors behind the escalation of the credit crisis.
Green said that although there was no room for "knee-jerk" responses to the broader market turmoil, the Financial Services Authority (FSA) did have room to act.
"There is a widespread recognition that attempts to regulate the quantum of payments are not particularly wise but it is entirely reasonable to look at the structure of compensation from the FSA's perspective for the moment.
"And if they were to conclude that the structure of compensation is such as to lead to excessive risk-taking - then (it is reasonable) to hit back in the form of higher capital ratio requirements and to get at the institutions in that way."
An FSA spokeswoman confirmed the regulator was preparing to tackle the issue of financial industry incentives. It is pulling together a thematic study from meetings with companies and will decide on a course of action once that is published.
She could not give a timeframe for the publication of the study, nor would she speculate as to its early findings.
Commenting on the wider aspects of the financial turmoil, Green said that at the heart of the matter was a breakdown of trust, both within the financial system and beyond.
"We are in the midst of a crisis which is extraordinary. This crisis is not just a downturn, it is not going to end with the status quo ante coming back when calmer waters are reached.
(Reporting by Joel Dimmock; editing by Jon Loades-Carter)
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