Sales Incentives

Inappropriate sales incentive schemes are part of a toxic banking culture that promotes high risk, short-term gains, and contributed to the 2008 financial crisis. Banks create sales incentives to encourage staff to sell more financial products and are often developed with no regard for customers' needs. This has led to mis-selling and irresponsible lending, the most catastrophic example being the inappropriate selling of mortgages to US consumers who couldn't afford the repayments: widely recognised as a trigger of the 2008 financial meltdown.

Risky Business

Our 2014 report Risky business: The case for reform of sales incentives schemes in banks (eng), called on global financial retailers and regulators to take action on sales incentives.

Drawing on evidence from consumer organisations, trade unions, banks and regulators in G20 and OECD countries, it argues that inappropriate sales incentives schemes represent an unacceptable risk to consumer protection and financial stability. 

The colossal compensation bills and losses to consumers, already measured at more than US$53 billion globally, are a clear indication of the scale of the problem.

Highlights, successes and related materials

  • Our work was referenced in the reports issued by the European Banking Authority and the International Financial Consumer Protection Organisation (FinCoNet), leading to both organisations issuing guidance to banks and supervisors on the structure, content, oversight and governance of sales incentive schemes.
  • FinCoNet published its international Guidance to supervisors on the setting of standards in the field of sales incentives and responsible lending (eng) in 2016. This aims to promote effective conduct and strong consumer protection in this area.
  • The European Banking Authority published guidelines to help banks to improve the links between incentives and fair treatment of customers and to reduce the risk of mis-selling.
  • The Bank of England started incorporating misconduct costs in their stress tests. This ensures that banks take into account potential risks arising from misconduct and sales incentive schemes when setting the amount of capital which they need to hold.

Risky business: The case for reform of sales incentives schemes in banks (eng)

Risky Business: Executive summary and recommendations (eng)


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