Banks’ ‘all or nothing’ pay schemes ‘too risky’

The "all or nothing" incentive schemes for sales staff that contributed to the collapse of the Irish banks that employed them were not structured in the best interests of consumers and were inherently risky, according to the Central Bank.

These schemes, which prioritised the volume of sales over the quality or suitability of the financial products being sold to customers, were not fit for purpose and had the potential to encourage poor sales behaviours among employees of financial institutions.

The report on variable remuneration of sales staff also found, while all firms had a process in place for the design and approval of incentive schemes, there was a failure to recognise the inherent risks in remuneration arrangement and to mitigate those risks.