Chancellor backs BoE call for bank bonuses to be cut

The Chancellor yesterday backed a call by the Bank of England Financial Policy Committee (FPC) for banks to cut bonuses to boost their capital buffers against financial shocks.

The FPC said in the minutes of its last meeting that, faced with short-term risks, banks should sacrifice payouts to staff and shareholders to conserve funds. Instead of reducing loans on their balance sheets, which could starve the wider economy of credit, they should build up their capital reserves, possibly by tapping shareholders, the FPC added.

George Osborne told Parliament that banks "should be using any earnings they have to strengthen their balance sheets if necessary, rather than distribute those earnings in larger bonuses. We need stronger banks, not larger bonuses this winter... I would expect the banking system to follow that advice."

The demands from the FPC and the Chancellor pile further pressure on Britain's banks ahead of a fraught end-of-year bonus round.

Grim economic conditions have cut profit estimates for the banks and big payouts to top bankers will be seen as a kick in the face to people suffering falling general living standards. Adding to the siege on the banks, the Association of British Insurers on Monday demanded the banks cut bonuses instead of reducing dividends.

The FPC's demands came as the Bank announced a new scheme to make funding available to banks if the market for short-term sterling liquidity dries up. Under the contingency plans, banks would be able to bid for funds by putting up top-quality assets as collateral.

The Bank's announcements demonstrate its fears that trouble is in store for Britain's banking system as the eurozone crisis and the weakening economy threaten a new wave of upheaval.

The committee also cast doubt on banks' financial targets and the calculations they make to judge the riskiness of their lending.

The minutes said targets for shareholder returns did not take into account that "new capital regulations should have made bank investments lower risk but also inevitably lower return". The subject will get a full airing at a future FPC meeting.

A further recommendation was for banks to publish "leverage ratios" in the next year showing a simple ratio of capital as a percentage of total loans. The committee said the banks' measure of "risk-adjusted assets" was difficult for investors to understand.

Banks may have to disclose pay packets

The Government turned up the heat on bankers' pay still further yesterday by proposing tougher disclosure for high earners. The Treasury wants to make banks publish details on the eight highest-paid non-board executives with a detailed breakdown of their salaries, bonuses, share options and other pay. About 15 banks would be caught by the requirement, including big foreign lenders in the UK. The companies would not have to reveal the executives' names. If the Treasury plan is adopted they will have to publish the details with their annual reports for this year.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

Recruitment Genius: Security Officer

£16500 per annum: Recruitment Genius: Applicants must hold a valid SIA Door Su...

Ashdown Group: Business Analyst - City, London

£50000 per annum: Ashdown Group: Business Analyst - Financial Services - The C...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss