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Create bankers’ code, Bishop urges

01 November 2013

CHURCH OF ENGLAND

THE Bishop of Birmingham, the Rt Revd David Urquhart, has supported calls for the creation of a remuneration code for bankers, under which the profit-based elements of their remuneration would be deferred for up to ten years.

Bishop Urquhart took part in the House of Lords' Committee Stage debate of the Banking Reform Bill, in support of an amendment designed to "strike a balance between risk to the bank providing [the remuneration] and fair reward for the recipient of it.

"In the wake of the economic débâcles following 2008, one of the greatest areas of concern among the public was the apparent lack of change in the financial fortunes of those whom they viewed as being most responsible for the banking crisis.

"The salaries of senior bankers seem to remain high, and bonus levels have quickly regained their old levels, while, for many ordinary people . . . across the country, it has been a matter of tightening the belt and looking very seriously at difficult household and commercial budget decisions."

He welcomed provisions designed to "limit sales-based incentives": "In the PPI scandal, we saw what happens when banks come to value the sale of financial products as the objective of the whole exercise, with little or no thought for customers' needs.

"Banks are now having to take responsibility for this culture of selling at any cost, and the new remuneration code before us seeks to make explicit the realisation that an excessively sales-based culture can be very damaging both to the financial well-being of customers, and to the reputation of the banks."

The amendment was opposed by the Government, which said that the financial regulators had already used their existing powers to create a mandatory remuneration code.

Lord Newby told peers that this existing code "requires that at least 60 per cent of variable remuneration above £500,000, or to a director of a significantly sized firm, is deferred over a period of not less than three to five years".

The existing code, he said, had statutory backing, and "any breaches . . . can be punished with serious sanctions." He warned that "overprescribing in primary legislation risks adding an unwieldy layer to what is already an effective process."

The amendment was withdrawn without a vote. The Upper House completed its Committee Stage of the Banking Reform Bill last week. There will be a further debate at Report Stage and Third Reading before it returns to the House of Commons.

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