UK ministers at loggerheads with FSA over bankers' bonuses
14 Aug 2009
Senior cabinet ministers in the UK are angry at the financial regulator new bonus rules released this week, for toning down a new law to curb banker's bonuses and are mulling bringing out legislation to curb the bonus practice, a menace derided by many nations and critics alike.
The Financial Times in a report today said that the UK Business Secretary Lord Peter Mandelson and other senior cabinet ministers were unhappy with the bankers pay code released by the Financial Services Authority (FSA) this week, which had toned down its own suggestions set out in March of bringing in tough measures to curb bankers bonuses.
They fear that with the FSA watering down the bankers pay code, financial institutions will go back to their old ways of paying fat remunerations to their employees for reckless lending, which led to the state pumping in billions of pounds in banks in October 2008 to avoid their collapse. (See: Britain unveils $906-billion bailout plan for banks)
Mandelson and other senior ministers feel that since the FSA is not willing to bring in tougher enforcement on bank bonuses, legislation may be required to bring it under control.
Ministers say that the new measures brought out by the FSA have been toned down from the suggestions the FSA had put forth in March 2009.
The March draft proposal of the new code put by the FSA, had suggested forcing financial institutions in paying two-thirds of the bonuses spread over three years, since bankers indulged in short-term speculation. Banks would have faced higher capital charges or enforcement action if they disregarded the new code.