Bankers’ bonuses should be deferred for as long as 10 years to hold executives accountable for risks, said Robert Jenkins, a member of a Bank of England committee charged with ensuring financial stability.
'Five years might or might not be appropriate for some categories of risk, but if we are going to rely on remuneration as a key driver of financial stability then it should probably be between five or ten years', Jenkins said in an interview last week in Washington. 'Ten years would capture the majority of risk cycles and therefore the gains and losses that came from any risk that was taken today'.
Bloomberg reports that Jenkins’ comments echo those of Andrew Haldane, another member of the BOE’s Financial Policy Committee, and signal U.K. regulators may continue to push banks to reduce risks. The central bank, which is adding regulatory powers to its monetary-policy remit, said in November banks may need to raise more capital to cover loan losses and that they may have overstated their capital strength.
The problem 'is that very large sums of money can be given to risk takers as a reward for the apparent profitability on the risks that they take before the risks have matured and before anyone knows for sure that it was profitable', said Jenkins, who was in Washington to attend a conference at the George Washington University Law School.
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