Gordon Brown will “ban” old-style bank bonuses and punish banks that continue to pay them, it emerged yesterday.
In an interview with the BBC, the prime minister promised legislation in the forthcoming Queen’s Speech to scrap automatic year-after-year bonuses and stop executives getting payouts unless they can prove they are deserved.
“Just as we will have a Fiscal Responsibility Act to deal with the public finances, we will come back and will have a new Business and Financial Services Act as well, that will ban the old bonus systems and make it impossible for firms to be able to use them,” he said.
Brown added: “Where there is bad behaviour the Financial Services Authority (FSA) will have the right to intervene and where companies are not prepared to act in a way that is consistent with all these new proposals about the fair treatment of bonuses and remuneration, there will be penalties imposed on these companies.”
Chancellor Alisatair Darling is expected to announce today that the new laws to curb bonuses will be brought in by the autumn, but he will encourage banks to start cutting excessive reward immediately.