Bankers find there is a penalty for failure

Discussion in 'Economics' started by Wordsmith, Feb 19, 2012.

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  1. Wordsmith

    Wordsmith LE Book Reviewer

    A bit of common sense in the banking sector.

    Lloyds Bank strips five directors of more than £1 million in bonuses - Telegraph

    A bit of background here - the banks have been ordered to repay large sums of money for mis-sold payment protection insurance (PPI). At worse case they were selling PPI to the self-employed who had no chance of making a claim due to the small print in the contract. The directors got large bonuses in part due to profits made from this mis-sold PPI. Now, they are having part of their bonus withheld because they were at the top of the bank when this abuse went on.

    Don't get we wrong. I think the UK needs a strong banking sector - it makes a vital contribution to our national balance sheet. But we'll only cut down on irresponsible risk taking when there are penalties for failure as well as bonuses for success.

  2. It's nice to see something, but this is still only a fraction of the bonus they'll STILL RECEIVE...

    How about a prison sentence for presiding over a fraudulant business practice? Now that's a consequence I can get behind...
  3. The biggest scandal is that an institution, the honesty of which many held as sacrosanct, has been shown to be less than honest. First it was endowment mortgages and now PPI. It used to be that the bank manager was the person who advised you on your finances. Where to invest and how to invest efficiently. Now it seems that the very people you should be able to turn to for good, honest advice, are one of the worst offenders for ripping the public off. It was all made so easy for them because of their reputation for honesty.
    If anyone knows of a bank that operates the old-fashioned way please let me know, they can have my money!
  4. Alsacien

    Alsacien LE Moderator

    The CEO, Daniels, has lost 360,000 quid of his 1.45 million quid bonus - that's him told then............and a victory for common sense........
  5. TheIronDuke

    TheIronDuke LE Book Reviewer

    What, and repossess thousands of lifestyle businesses bankers setup having cashed their chips from the Sub-Prime Ponzi scheme that ran all through the 90's and into the early 20's? Think of all those poor luxury spa / Gite / rent-a-mansion / restaurant employees out of work.
  6. It is a step in the right direction and hopefully will become an established principle. However I note that the recall is because it cost the bank millions not because they mis-sold to the public!
  7. Alsacien

    Alsacien LE Moderator

    Yep, you got it.
  8. No. You are paid interest on your cash deposit in compensation for the credit risk of that bank defaulting. The more risky business models (leveraged) should in a pure retail banking model pay higher interest rates.
  9. Don't worry about the bank defaulting, they'll have PPI won't they?