The chancellor has signalled that he will change the law to curb City bonuses, to ensure executives who take significant risks are not rewarded, the Sunday Times reported.
The new legislation, set to cover all financial institutions, would allow the government to control bonuses in all banks. It follows evidence that the City is already opting to pay its staff guaranteed bonuses regardless of banks’ performance. Goldman Sachs employees are in line for pay and bonuses averaging £430,000, and one new banker at RBS will get a guaranteed £7m bonus.
Chancellor Alistair Darling told the Sunday Times: “If we need to change the law and toughen things up, we can do that. I’m quite clear that some of the problems we have today were caused by the fact that some traders were incentivised to take risks that neither they nor their bosses fully understood.”
Last week, the Financial Services Authority dropped plans to make bonuses payable based on overall performance of a company, including it in the new code on bankers’ pay and bonuses as “guidance” only.
Darling did not say whether the new law would cap bonuses or outlaw guaranteed bonuses.