The financial watchdog will be given the power to “quash” City bonuses which could incentivise risk-taking, Labour has pledged.
Gordon Brown has promised to give the powers to the Financial Services Authority in a bid to tackle bumper bank bonuses.
The policy is similar to provisions which were contained in the Financial Services Bill, but were watered down this week during the parliamentary wash-up process ahead of the election.
Brown said: “This year we have seen a welcome reduction in the proportion of revenues global investment banks have paid out in bonuses. But we need to ensure that this is a structural change, not a one-off response to public pressure.
“So I can say that in our manifesto our financial services authority will be given powers to quash those contracts which incentivise reckless risk-taking and instability.
“And if there is evidence to show that constraints on bonuses are being evaded, we will act.”
Reiterating his warning that “short-termism” within banks had to stop, Brown said the government was prepared to be more interventionist in future, the Daily Telegraph reported.
He said: “Markets do need morals. Markets are built on values that they cannot themselves generate.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
“We need trust and we need fairness and we need responsibility if markets are going to flourish in the public interest.”
Brown added Labour would seek a global deal to force banks to hold sufficient capital.
