Osborne seeks settlement with banks on bonuses

FINANCIAL SERVICES

Osborne seeks settlement with banks on bonuses

The Chancellor has said the government is still in discussions with the banks over a “new settlement” to see whether they can pay smaller bonuses than in previous years. George Osborne said: “If the banks cannot commit to that, I have made it clear to them that nothing is off the table.”

Media reports had suggested that Downing Street had backed away from intervening in bankers’ pay, prompting [then] Shadow Chancellor Alan Johnson to ask an emergency Commons question on 11 January 2011.

Osborne said:

“Specifically on remuneration and bonuses, on 1 January this year we introduced the most stringent code of practice of any financial centre in the world. There will be for the first time a strict limit on the amount of bonus payable in upfront cash.

“There will be a requirement that 50% of bonuses are paid in shares or other non-cash instruments, which bank employees will not be allowed to sell on for an appropriate period. Guaranteed bonuses will become the exception and not the rule.

“And crucially, Mr Speaker, the new bonus code has been significantly extended. It will cover payments and bonuses at 2,500 firms - while the code we inherited covered pay and bonuses at only 25 individual financial firms.”

>>> A detailed analysis summarising the current position in the ongoing development of the new global regulatory framework for remuneration in financial service firms will be published next month in e-reward’s paid-for subscription series, e-research.

Osborne added:

“Mr Speaker, in the coming weeks all the banks will be announcing their pay and bonuses for this year. I can confirm that we are now in discussions with the banks to see if we can reach a new settlement, where:

• The banks pay smaller bonuses than they would otherwise have done;

• Are more transparent about those they do pay;
  

• Make a greater contribution to local communities and the regional economy;
  

• Treat customers fairly;
  

• And above all lend materially and verifiably more than they were planning to the businesses of Britain – especially the small businesses – so that they can grow and create jobs this year.”
  

Want to know more?

The full text of the chancellor’s statement is available on the HM Treasury web site at www.hm-treasury.gov.uk/press_03_11.htm.

Or you can watch BBC coverage at www.bbc.co.uk/news/business-12162917.