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Chancellor calls for bank bonuses to be paid over five years
Paul Waugh, Deputy Political Editor04.09.09
City bankers should be paid bonuses over five years rather than an annual lump sum, Chancellor Alistair Darling urged today.
As G20 finance ministers met in London, Mr Darling tabled the proposal to curb "short-term" rewards for bank bosses.
The plan goes beyond French calls for a three-year payout period but stops short of their demand for an additional blanket "cap" on bonuses.
Britain wants to hammer out a deal before this month's full G20 meeting in Pittsburgh in the US and believes the Americans will prefer a "long-term" bonus scheme rather than a cap.
With the Treasury keen not to choke income from the City, Nicolas Sarkozy taunted Gordon Brown over the issue yesterday, saying "even the English understand that you have to regulate, you have to impose limits".
Mr Brown only signed up to a joint letter penned by the French president and German chancellor Angela Merkel this week after a reference to bonus caps was watered down.
But Mr Darling is committed to getting new rules to force banks to increase capital requirements to boost longer-term stability.
His proposals would require banks to pay out bonuses over five years, with no guaranteed payouts and a significant proportion in non-cash rewards such as shares.
The shares would be subject to clawback if performance drops.
Mr Darling believes the FSA's new code of practice, which takes the banks bonus policies into account in deciding capital levels, is a model for other countries.
But he dismissed claims by FSA chief Lord Turner that parts of the City were "socially useless".
He told BBC Radio 4's Today programme: "I think you get into huge difficulties if you try to draw up a list of what's useful and what's useless."
The Chancellor last night told a CBI dinner in Glasgow that "tough... and sensible" rules were needed, but they had to be "global in scope and practical in action" - a reference to the impracticality of calls for a cap.
The G20 is likely to insist new capital requirements are strictly enforced, with institutions that do not comply being effectively barred from operating.
Today's meeting at the Treasury is expected to paper over differences on exactly when the G20 should seek an "exit strategy" from their joint fiscal stimulus packages.
Mr Darling wants to bar big banks from buying up Northern Rock or taxpayers' stakes in Lloyds Banking Group and the Royal Bank of Scotland.
He wants "new entrants" to the banking sector, possibly including supermarkets.
Reader views (5)
Talk about Turkey's voting for Christmas. The UK economy will be late out of recession because we specialise in financial services. Fine, I can cope with that as it is a good thing to specialise in - the value added is enormous and felt by the whole of the UK(and the govt. will make big money out of the "bailouts", you watch). Would Detroit push for stricter regulations on cars or for double the vehicle tax? Would Washington DC vote for smaller government? Would Milan or Paris want to restrict what a fashion desiigner can earn? It is economic suicide of the first order. Why not let the others restrict bonus payments and watch London become an even richer city with an even higher tax take from financial services? Only an economic illiterate would want otherwise.
Learn up guys - quickly please.
- Milton Not Keynes, Hackney
"Chancellor calls for bank bonuses to be paid over five years" - and the banking fat cats just laughed and told him to get lost! What a loser!
- Keith Lonsdale, Doncaster
Dave of London - it naive individuals like you who fail to recognise banker's bonuses pay 10% of the total tax take in the UK. That tax pays for the long term unemployed, the nhs, the teachers, roads and more. Trust me, you will suffer when they all leave for lower tax regimes in Switzerland or Dubai. This country will be even more broke and you'll look a tad daft.
- Toby, London, london
how out of touch is this buffoon?
many bonuses do vest over 4 and 5 years.
- Scotty, london
No Bonus, end of story. Why should these rich overpaid people get bonuses.Every working and middle class person gets a wage for doing the job they were hired for.Bonuses were invented by the filthy rich to steal more from the companies and widen the gap between themselves and the working class.Without the working class their would be no profits in the first place.
- Dave, london
