Osborne call to stop bank cash bonuses over £2k
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Conservative Shadow Chancellor George Osborne has called on the Treasury and the FSA to stop high-street banks paying out cash bonuses of more than £2,000.
Osborne said retail banks should be banned from paying out cash bonuses to allow profits to be channelled into new lending in a speech at Thomson Reuters in Canary Wharf on Monday this week.
Osborne’s comments follow calls from shareholder groups such as Hermes Equity Ownership and hedge fund manager George Soros to ensure that banks do not pay bonuses out of profits generated on the back of taxpayer support.
Osborne said retail banks should only be allowed to pay significant bonuses in shares. The Tories calculate that these savings could pave the way for up to £20bn of new lending. Investment banks would be exempt from the measures which would apply to the investment arms of banks that also lend to consumers.
The Tories say this is an emergency plan that would be temporary and would run along- side the new agreement signed by the banks and the FSA.
Osborne said: “I am calling on the Treasury and the FSA to combine forces and stop retail banks - in other words the banks that lend directly to businesses and families - paying out profits in significant cash bonuses. Full stop.
“That includes their investment banking arms. Then the cash that would have been paid out should be put on to banks’ balance sheets explicitly to support new lending.”
The British Bankers’ Association says: “The big bonus culture is not in retail banking but investment banks. Most retail banks are weathering the economic downturn well and have not used any taxpayers’ money.
“We have always said that bonuses need to be tied to the long-term success of the business and they cannot reward undue risk-taking.
“Working with our regulatory authorities, we believe that the commitment we have now made to this principle is unequivocal and total.”
Liberal Democrat Shadow Chancellor Vince Cable said: “The Tories have been deeply ambivalent on the much more fundamental question of what we do about the future of the banking system.
“They have not given full backing to Mervyn King’s proposals on splitting up the banks and these bonus proposals are short-term, stop-gap solutions designed to stem public anger but which fail to get to the heart of the problem.”
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