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Brown says no to big bank bonuses

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Brown says no to big bank bonuses

Wednesday, 18 February 2009

Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

Gordon Brown cracks down on bonuses for employees of all bailed-out banks, including Lloyds TSB/HBOS.

Prime Minister Gordon Brown today said that recently merged banks Lloyds TSB (www.lloydstsb.com) and HBOS (www.halifax.co.uk) will be subject to the same policy on bonuses that saw Royal Bank of Scotland (RBS) (www.rbs.co.uk) cut payouts by 90%.

RBS, which is now 70% owned by the state after accepting £20 billion of taxpayers’ cash, said that cash bonuses for its employees would be slashed by 90% to £175 million this year.

Writing in The Times, Gordon Brown said that the banking industry’s “old excesses” and “one-way bet culture” must be consigned to the past. He then laid our “four principles of fairness” that would apply to bonuses for bailed-out banks.

These included the vows that “there must be no reward for failure”, “there should be no bonuses in the future unless they are based on long-term sustainable performance” and that banks should be allowed “the right of clawback”, ie to claim back bonuses if an employee’s performance is not sustained.

Brown said of the RBS payouts, “only those where the bank has no option will be honoured”. He said the “same principles” that were applied to RBS would now be applied to Lloyds TSB/HBOS, which is reportedly considering bonus payouts of up to £120 million.

Chris Eagle, commercial manager at CreditChoices.co.uk said: “I think it would be unfair on the average bank employee to ban bonuses completely; however the government does need to keep a tight control on the level of bonuses that are paid out.

“When so much of the taxpayer’s cash has been pumped into these banks, it’s important that they operate in a logical and responsible way.”

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