LONDON, Nov 16 — Financial regulators have no intention of capping bankers’ bonuses under new powers planned to curb big payouts that drive excessive risk-taking, Financial Services Minister Paul Myners said yesterday.
Myners was trying to clarify what the reforms would mean after Chancellor Alistair Darling said in a newspaper interview the Financial Services Authority will soon have the power to “tear up” bankers contracts.
“We’re not capping bonuses because once we start capping bonuses in one sector, we’re on to a slippery slope,” Myners told Sky News in an interview.
He said senior people in banking are “very keen that we should do these things.”
“We are going to make it clear that contracts which add bonus clauses that will add to risk, or contracts that will generate bonuses for risk-takers are no longer acceptable,” Myners said.
“What we’re doing is ensuring that banks no longer have bonus and incentive arrangements in place which contribute to excessive risk-taking. We’re seeking to de-risk the system.”
He said the responsibility of ensuring compliance would pass to the board of directors and the shareholders. The laws would also only apply to future employment contracts, he said.
“If they don’t get these things right, then we may have to revisit the issue.”
Angela Knight, chief executive of the British Banker’s Association, said the government legislation needed to tread carefully so as not to hound institutions out of Britain.
“The UK has already taken some very strong steps as far as remuneration is concerned, putting the whole remuneration structure into regulation in a way that other countries may talk about, but have not yet done,” she told BBC radio.
“But looking at legislation, we have to look at the wider context, and that is the UK as the big global centre for international banking that it is, and how it will impact there.”
In an interview with the Sunday Telegraph, Darling said new laws were needed to stop bankers receiving bonuses that risked “causing instability.”
He said the measures, contained in the Financial Services Bill, will be outlined in the Queen’s speech on Wednesday.
In the speech, the government will outline its remaining legislation between now and the general election due by June 2010.
Myners said he was sure the Financial Services Bill would be able to get on to the statute book before then. — Reuters
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