SYDNEY (BLOOMBERG) - Australia & New Zealand Banking Group will scrap bonuses for frontline staff, after an inquiry into misconduct in the financial industry blamed the pursuit of bonuses for most of the wrongdoing.
Individual bonuses for the vast majority of employees will be replaced with an incentive payment based on the overall performance of the bank, the Melbourne-based lender said in a statement on Tuesday (Aug 6). Only senior executives will still receive individual bonuses.
"The Royal Commission rightly shone a light on the negative impact the over-emphasis on individual bonuses within a bank can have on customers and the community," chief executive officer Shayne Elliott said in the statement.
The misconduct inquiry unearthed years of wrongdoing, from banks charging customers for services they never received, to selling worthless insurance and pushing people into poorly-performing funds to meet bonus targets.
"In almost every case, the conduct in issue was driven not only by the relevant entity's pursuit of profit but also by individuals' pursuit of gain," Commissioner Kenneth Hayne wrote in his final report.
The so-called group performance dividend will be based on the bank's performance from a risk, financial, customer, people and reputation perspective, ANZ said in the statement. While the move won't impact total compensation, the mix between fixed and variable pay will change, the bank said.
The decision to overhaul pay for frontline staff comes after the prudential regulator last month proposed tougher rules for executive bonuses, including longer vesting periods and clawback provisions.