Queen’s Speech to tackle City bonuses

by Gill Montia

Story link: Queen’s Speech to tackle City bonuses

New legislation to be outlined in this week’s Queen’s Speech will include measures to restrain City bonuses.

According to reports, a new Financial Services Bill will allow the Financial Services Authority to nullify bankers’ employment contracts that could promote the attitudes to risk that have been blamed for the credit crisis.

The outlawing of guaranteed bonuses and payments in cash (rather than shares) plus claw-back mechanisms, will all ensure that bonuses are linked to the longer-term profitability of a financial institution.

However, the new rules are reliant on the Bill making its way through parliament before a General Election and will not come into effect until 2010, even if the route is swift successful.

Speaking to Channel 4 News, Financial Services Secretary Lord Myners said that the proposed legislation would not apply to an estimated 1,000 to 5,000 existing contracts, because of the legal problems involved in revoking the contracts.

Meanwhile, on the Downing Street website, Prime Minister Gordon Brown has promised “a transformation of the way the financial sector is policed, with banks themselves and not the taxpayer made to pay for bank failings”.