Bank of Russia recommends that financial institutions deprive employees of bonuses for deluding customers
The Bank of Russia recommends that financial institutions implement financial and non‑financial incentive policies encouraging employees to enhance the quality of, rather than increase sales of, financial instruments and services. The relevant information letter signed by Bank of Russia Governor Elvira Nabiullina has been sent to heads of banks and non-bank financial institutions.
Quite frequently, a customer is deluded about the specifics of financial instruments or services before buying them, as well as about the risks inherent in such a purchase. This may not only cause losses for customers, but also decrease their confidence in the financial market in general. Such unfair practices of financial institutions are often a consequence of their remuneration policies incentivising employees to increase the number of sales.
In order to improve the quality of sales, the Bank of Russia recommends that financial institutions (including agency networks) devise and approve their internal standards for offering and selling financial instruments and services, including for the provision of comprehensive information, as well as exercise control over compliance with these standards.
All employees of a company shall adhere to the said standards. Specifically, it is advised to incentivise members of financial institutions’ executive bodies, middle managers engaged in advertising, offering and selling financial instruments and services, as well as employees whose functions are directly related to sales. The Bank of Russia recommends that companies focus not so much on increase in sales, but rather on the quality of these sales when awarding bonuses to such employees. Organisations are also advised to reduce the remuneration if an employee violates the above standards for offering and selling financial instruments and services.