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PM adds to bank bonus debate

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by Kay Mitchell

The topic of bank bonuses continues to hit the headlines with Prime Minister Gordon Brown suggesting a possible cap on bonuses within the banking industry, and indicating that bonuses should be based on long-term success.

The PM added that banks should be able to “claw back” bonuses if the bank later performed poorly.

Mr Brown was speaking to the Financial Times ahead of this week’s Group of 20 finance ministers meeting in London, where the subject of bonuses will be high on the agenda.

Bank bonuses, in particular, have sparked public anger and have been the subject of heavy criticism since it is banks that are being blamed for the financial crisis.

The PM told the Financial Times: “I think you’ve got to be absolutely clear that remuneration has got to be based on long-term success, not short-term speculative deals, that there’s got to be a claw back system.”

“We’ve also got to look at whether the capital requirements of individual institutions would have to be increased in situations where the regulator thought that risk was higher,” he added.

Last week, the chairman of the Financial Services Authority announced he was supporting a new tax on banks, aimed at curbing the bonus culture in the City.

In an interview with Prospect magazine, Lord Turner attacked the industry and said some of the City’s activities had “swollen beyond its socially useful size” and was happy to consider taxing it.

Meanwhile, the Prime Minister was upbeat about the UK economy and said: “There’s definitely been an improvement since April against what people forecast and, as far as the British economy is concerned, I would say that we are cautious but we’re cautiously optimistic about the future.”

Over the weekend, Mr Darling said Britain will join other leading economies and emerge from recession within the next few months.

In an article in the Guardian, Mr Darling wrote: “I am determined the recovery will be sustainable and lasting, that no one should be consigned to the scrapheap, like so many were in the recessions of the 80s and 90s.”

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News posted: September 1, 2009

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