Chancellor weighs in on City bonuses

by Gill Montia

Story link: Chancellor weighs in on City bonuses

City financiers could be subject to new legislation to restrict the huge bonus payments that have been blamed for encouraging risk taking.

The row over City bonuses and their part in the credit crisis has been simmering away for months and last week the Financial Services Authority (FSA) came in for criticism when it delayed the introduction of its new code on remuneration policies.

The regulator was also accused of failing to grasp the nettle with the new regime, which intends to link bonus payments to the long-term profitability of the UK’s larger banks, building societies and broker dealers.

Chancellor of the Exchequer, Alistair Darling, has now responded to the outcry by saying that changes in the law have not been ruled out to curb bonus payments.

Speaking to The Sunday Times, Mr Darling explained that the FSA code formed only part of the Government’s response to City bonuses.

He also acknowledged public anger over the issue and said he was “quite clear” that traders being incentivised to take risks had led to some of the problems being faced today.

However, the newspaper also reports that City bonuses could reach £4 billion in 2009 and that some firms have already adopted a “business as usual” attitude to remuneration, bypassing public opinion and ignoring the fact that the British taxpayers has provided backing for the entire UK banking sector by way of guarantees, if not by actual injections of cash.