PM backs bonus claw-back for poorly performing banks
by Gill Montia
Prior to the international gathering of finance ministers to be held later this month, Prime Minister Gordon Brown has outlined his position on the bonuses paid to bank executives.
The debate over bankers’ bonuses has been raging nationally and internationally since the onset of the credit crisis, with accusations that the bonus culture favours short-term gain and threatens effective risk management.
In an interview with The Financial Times, Mr Brown has now declared that bonuses need to be geared towards the long-term success of a financial institution, adding that bonuses should be clawed back if a bank turns in a poor performance once the windfalls have been handed out.
In addition, the Prime Minister called for an international approach on bankers’ remuneration but drew back from French proposals to cap bankers’ pay.
He also acknowledged the importance of protecting the status of London as a global financial centre and distanced himself from the view expressed by Lord Turner, head of the Financial Services Authority (FSA), who sees the UK’s financial services sector as having “grown beyond a socially reasonable size”.
Neither was any mention made by the PM of Lord Turner’s support for a new tax on bank transactions, which could curb the bonus culture and at the same time provide funds for the public good.
The FSA is currently in the process of checking banks’ remuneration policies, which under new regulations due to come into force in January need to be “consistent with and promote effective risk management”.