UK: The CEO of the PRA comments on bonuses and governance

Andrew Bailey, a Deputy Governor of the Bank of England and the Chief Executive Officer of the Prudential Regulation Authority, delivered a speech yesterday in which he referred to several areas of current controversy: bonus policy (in the light of the EBA's recent report on the payment of allowances and their use to circumvent the bonus cap) and individual accountability (against the background of the PRA consultation on the new senior managers regime).

With regard to bonuses, and incentives more generally, Mr Bailey observed "... the bonus cap is the wrong policy, the debate around it is misguided, and the best thing I can say about allowances is that they are a response to a bad policy". With regard to governance, and the new regime, he stated: "... is it really unreasonable to expect the most senior figures to assume responsibility? Not in my view, and in my experience not in the view of those who take on these roles".