New rules could see bonus contracts torn up
Bankers will see excessive pay and bonuses contracts torn up if they promote undue risk-taking under tough new rules outlined today in the proposed Financial Services Bill.
The Financial Services Authority (FSA) will be handed new powers to void banker contracts and fine those that continue to offer unjustifiable sums.
The Bill outlined in the Queen's Speech will also widen the scope of the FSA's financial stability remit to cover any firm deemed to be systemically important, such as foreign firms not regulated on these shores.
This will help avoid the Icesave dispute last year at the height of the global financial crisis when the Government had to step in and seize assets of the failed Icelandic group in order to compensate British savers.
The move to hand the FSA a statutory financial stability objective will also see hedge funds - many of whom are based overseas - fall more within its powers.
The Treasury said the purpose of the Bill was to "ensure the financial system that emerges from the crisis is one not only rebuilt on a stronger and sounder footing, but is also one that is fairer and works better for consumers".
It will allow the FSA to "take action nationally and internationally on remuneration" and make bank pay "more appropriate and transparent with a better link between remuneration and effective risk management", added the Treasury.
The Bill will also introduce tougher requirements for so-called "living wills" for banks to ensure they have contingency plans in place for an orderly wind-up should they fail - a measure that comes in the wake of the collapse of Lehman Brothers and the subsequent mammoth bank bailouts.
This will primarily see banks set up emergency plans to ensure retail savings operations are ring fenced from investment banking business in the event of collapse.
More details are expected when the Bill is published tomorrow, while the Treasury said the banker pay and remuneration crackdown would also include elements of the imminent report on corporate governance by City grandee Sir David Walker.
The Treasury confirmed the Bill would look to encompass reforms designed to end the guaranteed multi-year bonuses and mega pay deals that have been partly blamed for the banking sector meltdown.
The FSA is already introducing a code of practice next year that will tally with international G20 agreements on bank pay to see the sector include bonus claw back clauses, limit cash bonuses and defer payments over a number of years.
- 1 Drugs Live cannabis trial: Hash is less harmful than any other drug, expert claims
- 2 Have sex with your iPad thanks to the new sex toy no-one asked for
- 3 The 'sex selfie stick' lets you FaceTime the inside of a vagina
- 4 Adam Levine's biggest fan had a panic attack upon meeting him, so the singer laid down on the floor to get a photo with him
- 5 Why you're almost certainly more like your father than your mother
Out-of-touch MPs ‘don’t get it’, says ex-Civil Service chief
Mark Zuckerberg: Facebook CEO's one simple test for who to hire
Bali nine: Welcome to 'Execution Island' – the Indonesian holiday resort where foreigners are sent to die
'A girl is more responsible for rape than a boy': The statement that shocked the world... except India
The 'sex selfie stick' lets you FaceTime the inside of a vagina
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
£45000 - £55000 per annum + benefits: Ashdown Group: Senior VMware Platform En...
£10000 - £16000 per annum: Recruitment Genius: A distributor of specialist ele...
£17000 - £19000 per annum: Recruitment Genius: A distributor of specialist ele...
£32000 per annum + pension, healthcare & 23 days holiday: Ashdown Group: A gro...