Osborne: defer bank bonuses? Too right

The chancellor has backed proposals to put off bonuses and make bad (bank) management a legal offence.

by Emma Haslett
Last Updated: 12 Jul 2013
It’s been five years since the banking crash, and two-and-a-bit weeks since the Parliamentary Commission on Banking Standards published its 571-page tome on how to make banks behave more responsibly. Today, the chancellor will outline to parliament measures to tighten up the UK’s banks. At least he can’t be accused of rushing things…

There were suspicions he’d avoid some of the banking commission’s more out-there ideas, but it looks likely he’ll at least support the majority of its proposals. Sensibly, we’d say: given the make-up of the commission (Baroness Kramer, Lord Lawson, Lord McFall, Lord Turnbull, the Archbishop of Canterbury…), a lack enthusiasm could lead to a full-scale rebellion in the House of Lords.

Proposals he’s likely to back include the idea that banks’ boards should take more personal responsibility for their company’s behaviour. To that end, it looks like he’ll add a clause to the banking reform bill (due to be debated in the House of Lords shortly) which makes ‘reckless misconduct in the management of a bank’ a legal offence.

He also wants to toughen up corporate governance rules, making the position of chairman of a bank’s board into a full-time role. Controversially, it’s thought he’ll also support the idea of deferring bonuses for up to 10 years, making it easier to ‘claw back’ cash if the bank doesn’t perform well.

There are a couple of ideas he’ll reject: scrapping UK Financial Investments (the body which oversees taxpayer-owned banks), for one. And a proposal by Sir John Vickers, the former chairman of the Independent Commission on Banking (different to the Parliamentary Commission on Banking Standards – keep up…), that capital ratios should be raised to 4%, from the current 3%, looks likely to be quashed, too. The jury’s still out on Vickers’ plans to ring-fence retail banks, though…

Meanwhile, the privatisation of Lloyds is steaming along. If Sunday’s papers are to be believed, the government has been approached by everyone from Singapore’s sovereign wealth fund to a consortium led by former Standard Chartered chairman Mervyn Davies (aka Lord Davies of Abersoch) to take the bank off its hands.

Consequently, shares in the bank had risen by nearly 2.4% by nine o’clock this morning. If it keeps going like this, that’s one less problem for the chancellor to be thinking about…

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