British banks will be forced to reveal how many of their staff earn more than £1 million (US$1.6 million) a year under recommended reforms of the financial sector released yesterday.
Half of bonuses paid to bankers should also be deferred for three to five years, said a government-backed review of banks, commissioned in the wake of the financial meltdown that plunged the sector into crisis. Sir David Walker, who carried out the review, said the number of staff earning more than £1 million must be disclosed — although they should not be named.
“In the big banks there would be hundreds of people paid more than a million,” said Walker, a former investment banking boss.
Remuneration over £1 million should also be broken down, including into salary, cash bonuses, deferred shares and pension contributions for publication, the review’s report said.
Finance minister Alistair Darling pledged to swiftly implement the report’s recommendations, which also include giving non-executive directors more power to monitor banks’ risk-taking and pay deals.
“Sir David’s proposals are the blueprint for how banks must be run in the future,” the chancellor of the exchequer said.
Some of the recommendations, including revealing top-end pay, are already included in legislation announced last week by British Prime Minister Gordon Brown in his policy-setting Queen’s Speech.
Walker said he had asked the government to put the proposal into legislation because otherwise financial firms would “think of any reason” not to comply.
“I think disclosure of high-end remuneration just would not happen unless it is statutorily based,” he said.
Some observers blame the bonus culture of the world’s two pre-eminent financial sectors — the City of London and Wall Street — for encouraging excessive risk-taking, which helped to tip the global economy into chaos.
The UK spent billions of pounds bailing out some of the country’s biggest institutions, including Royal Bank of Scotland and Lloyds Banking Group at the height of the financial crisis.
Reports said yesterday that Walker’s recommendations on pay and bonuses were tougher than those agreed at the G20 summit of world leaders in September and that UK banks have already agreed to.
The review, commissioned in February, also wants a greater role for chairmen of banks, who should stand for reelection to their boards annually, rather than the three years currently stipulated, to make them more accountable to shareholders.
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