FSA to be given powers to ‘quash’ City bonuses under Labour

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.

“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.

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