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LONDON, Feb 3 (Reuters) - Britain's banking regulator shouldbe given new powers to limit the use and scale of the kind ofsales-based incentive schemes that led to Lloyds beingfined record sums for mis-selling products, an influentiallawmaker has said.
Andrew Tyrie, chairman of the parliamentary committee thatscrutinises the country's finance ministry, said on Monday hehad written to the regulator to urge changes to the way retailbanking staff were remunerated.
The issue of how bankers are paid, and whether this leads tothem taking on too much risk, has become a hot topic since thefinancial crisis in 2008. The focus has mostly fallen on seniorexecutives or traders, but Tyrie said such scrutiny needed toextend to retail banking staff because they too could bringincreased risk to the system.
Lloyds Banking Group, which is trying to burnish its imageand bolster capital levels before the sale of the government'sremaining 33 percent stake in the lender, was fined 28 millionpounds in December for the way it encouraged staff to sellproducts to customers who did not need them.
The probe, which covered the sale of products such ascritical illness or income protection, uncovered such incentivesas the chance to win a one-off payment, known as a "grand inyour hand" or a "champagne bonus".
Tyrie, in a letter to the head of the Financial ConductAuthority (FCA), Martin Wheatley, said in some casesremuneration structures encouraged behaviour which added greatrisk to the financial system.
"Incentives have been deeply misaligned for significantnumbers of front-line staff, not just highly remunerated tradersor the most senior executives," he said. "Deep cultural changeis needed."
Tyrie said the FCA had so far shown little enthusiasm fortaking action against the use and scale of sales-basedincentives, but that it should now reconsider in light of therecord Lloyds fine.
"Unless such issues are addressed now, the risk of conductfailure at some point in the future can only increase," he said.
The call by Tyrie and the reference to the record fine islikely to overshadow an announcement by Lloyds, also released onMonday, about how it intends to help communities in Britainprosper through a raft of proposals including increased lendingto smaller companies, first-time buyers and charitablefoundations.
The bank said Chief Executive Antonio Horta-Osorio would usea speech on Tuesday to set out a list of commitments which wouldalso include a pledge to fill 40 percent of senior roles withwomen.
"The reputational impact of the financial crisis upon thebanking industry's stature has been immense," he said in astatement released ahead of the speech. "Rebuilding a soundreputation founded on the highest standards of responsiblebehaviour is key to the industry's long term success."
