The Financial Services Authority’s (FSA) investigation into bankers’ bonuses could result in legal challenges against banks from disgruntled employees, a legal expert has warned.
The new chairman of the FSA, Adair Turner, told the BBC the organisation could clamp down on banks offering bonuses that encouraged workers to take “risky actions”. While Turner ruled out regulating bonuses, he said the FSA will examine the structure behind the payments.
But Bob Mecrate-Butcher, employment partner at law firm Pinsent Masons, said: “There is a significant expectation built up over many years that bankers will receive a yearly bonus. It is likely that if investment banks sought to pay no bonuses, or to reduce them beyond the level justified by reduced financial performance, they would be subject to legal challenge.”
He added that if financial rewards previously offered by banks were no longer available, investment bankers would be unlikely to work such long hours and sacrifice their private and family lives to the same extent as currently. “It seems highly unlikely that the City bonus is a thing of the past,” he said.
However, Turner stressed that the City’s bonus culture did not contribute dramatically to the current financial crisis, and “should not be overstated”.