The British government is prepared to tighten the laws on bankers’ pay and bonuses if companies continue to reward excessive risk-taking, British finance minister Alistair Darling told the Sunday Times newspaper.
Darling said in an interview on the paper’s Web site that he understood public concern over high salaries at banks, many of which sought government support during the credit crisis.
“If we need to change the law and toughen things up, we can do that,” he was quoted as saying.
“The public is rightly concerned because the taxpayer has had to stand behind a number of these banks, and the whole banking system, in effect. So people want to make sure we don’t get ourselves into this situation again,” he said.
He gave no details about the possible new laws or the appropriate level or type of pay schemes offered to the highest performers in the financial sector.
Britain was forced to nationalize lenders Northern Rock and Bradford & Bingley and take large stakes in the Royal Bank of Scotland and Lloyds after they were hit by the global economic and financial crisis.
British Prime Minister Gordon Brown, trailing in the polls with an election less than a year away, has overseen unprecedented measures to help the financial system, putting an estimated £1.3 trillion (US$2.15 trillion) of taxpayers’ money at risk.
Britain’s Financial Services Authority issued new guidelines about bank pay earlier this week, banning guaranteed bonuses of more than one year and suggesting pay be structured to deter short-term risk taking.
But some politicians and voters are worried the measures don’t go far enough and banks are returning to “business as usual,” with huge rewards for top-performing staff.
Similar concerns have been expressed across Europe, Asia and North America.
Darling, keen to address public anger over high pay during the worst recession for generations, said banks must not be allowed to repeat past risky behavior.
“I am quite clear that some of the problems we have today were caused by the fact that some traders were incentivized to take risks which neither they nor their bosses fully understood,” he told the Sunday Times.
The British Bankers Association says Britain’s rules on bankers’ pay are already among the most stringent in the world.
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