Banks should cut pay to win over investors - BoE's Jenkins

LONDON (Reuters) - Banks could win back the stock market's confidence by slashing management salaries and having their investments independently valued, a senior British central banker said on Wednesday.

The banking industry, shunned by equity investors since parts of it were bailed out in the 2008 crisis, should at the same time raise new capital to demonstrate it can absorb any future financial hits, the Bank of England's Robert Jenkins told an investor conference in London.

Jenkins said the measures, set out in what he called a "dream speech" delivered by a fictional banking chief executive to shareholders, could pre-empt efforts by regulators to impose tighter rules on the sector and remove a key source of uncertainty.

"This approach will put us ahead of the regulators and leave them with no place to go; they will cease to be a factor in the management of our business," Jenkins told a conference organised by the Association of British Insurers.

The ABI, whose members own about a fifth of the London stock market, warned in a report this month that investors were put off buying bank stock because new regulations were eroding the sector's shareholder returns.

Financial watchdogs worldwide, eager to prevent a repeat of the 2008 crisis, are pushing banks to restructure and hold more capital, eroding their profitability. In Britain, the sector has also been hit by multi-billion pound penalties for misdemeanours including the mis-selling of loan insurance.

Jenkins, a member of the BoE's Financial Policy Committee and a former investment banker and fund manager, said banks should ask senior staff to accept a "sharp and permanent" cut in fixed pay in return for a one-off award of deferred shares.

High pay for senior bankers has come under the spotlight since taxpayers were forced to provide lenders with billions in emergency finance four years ago, leaving some, including Royal Bank of Scotland and Lloyd's Banking Group in Britain, under partial state ownership.

Jenkins said his manifesto could "transform the rating" of any bank that put it into practice.

"The pieces are there for someone at CEO level to come forward and become a financial statesman," he told the conference.

(Reporting by Myles Neligan; Editing by Helen Massy-Beresford)

Source: http://news.yahoo.com/banks-cut-pay-win-over-investors-boes-jenkins-162804653--sector.html

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