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The boss of the UK's financial services watchdog says he would be happy to consider the use of a new tax on banks to prevent excessive bonus payments. The boss of UK watchdog the Financial Services Authority (FSA) says he would be happy to consider a tax on banks to prevent excessive bonus payments.
Lord Turner, chairman of the Financial Services Authority (FSA), also said the financial services sector had "grown beyond a socially reasonable size". FSA chairman Lord Turner also told Prospect magazine that the financial services sector had "grown beyond a socially reasonable size".
The FSA said he was "not setting out any new policy" in his comments to Prospect magazine. The FSA said he was "not setting out any new policy" and the government said taxation was a matter for the Treasury.
Meanwhile the government said tax was a matter for the chancellor. The FSA's regulations on bonuses have been criticised for being too weak.
They were announced on 12 August, five days after Lord Turner took part in Prospect's roundtable discussion.
'A ploy'
The new rules, which will come into effect in January, will ensure bank bonuses are not guaranteed for more than a year, and that senior employees have their bonuses spread over at least three years.
If we introduce the wrong kind of regulation or the wrong kind of taxes we could [drive] business abroad Brian Capon, British Bankers' AssociationIf we introduce the wrong kind of regulation or the wrong kind of taxes we could [drive] business abroad Brian Capon, British Bankers' Association
Lord Turner told Prospect magazine, in an interview that was conducted on 7 August, that a tax on financial transactions in the City would cut banks' profits, and thereby reduce the funds available for bonuses. But some analysts have suggested there may be political reasons for Lord Turner to be sounding tough on the City.
He said such a tax would be "a nice sensible revenue source for funding global public goods". "[The comments] may be a ploy to persuade Mr Osborne and the Conservatives that, were they to be elected, they should retain the FSA rather than pass the baton for regulation to the Bank of England, which is one of the shadow cabinet's proposals," James Bevan from CCLA Investment Management told the BBC.
'Very difficult' Lord Turner said that a tax on financial transactions in the City would cut banks' profits, and thereby reduce the funds available for bonuses.
British Bankers' Association spokesman Brian Capon said the UK was the top centre in the world for global banking, "an achievement that we shouldn't take lightly". He said it could be "a nice sensible revenue source for funding global public goods".
"If we introduce the wrong kind of regulation or the wrong kind of taxes we could so easily lose that position by driving business abroad," he said. But he conceded that "the problem is that getting global agreement will be very difficult".
Lord Turner conceded that "the problem is that getting global agreement will be very difficult". French rules
G20 leaders have been discussing bonuses and said in April that they would clamp down on excessive pay.G20 leaders have been discussing bonuses and said in April that they would clamp down on excessive pay.
French banks have recently agreed to a new set of rules. These mean there will be penalties for traders who lose money, as well as rewards for success.French banks have recently agreed to a new set of rules. These mean there will be penalties for traders who lose money, as well as rewards for success.
French President Nicolas Sarkozy has said he will press for tougher controls on bankers' bonuses at the next G20 summit in the US city of Pittsburgh in September.French President Nicolas Sarkozy has said he will press for tougher controls on bankers' bonuses at the next G20 summit in the US city of Pittsburgh in September.
Chancellor Alistair Darling will be raising the issue at next week's summit of G20 finance ministers.
The British Bankers' Association warned of the dangers of taking action that would drive financial services companies overseas.
"We are the top centre in the world for global banking... that's an achievement that we shouldn't take lightly," its spokesman Brian Capon said.
"If we introduce the wrong kind of regulation or the wrong kind of taxes we could so easily lose that position by driving business abroad," he said.
'Socially useless''Socially useless'
Lord Turner also addressed the question of whether the financial services sector had become too big.Lord Turner also addressed the question of whether the financial services sector had become too big.
He condemned some financial innovation as "socially useless", questioning whether "the world would have been better off without any credit default swaps".He condemned some financial innovation as "socially useless", questioning whether "the world would have been better off without any credit default swaps".
"There clearly are bits of the financial system... which have grown beyond a socially reasonable size," he added."There clearly are bits of the financial system... which have grown beyond a socially reasonable size," he added.
He said that you could tell that by considering "what percentage of highly intelligent people from our best universities went into financial services".He said that you could tell that by considering "what percentage of highly intelligent people from our best universities went into financial services".
'A ploy'
The FSA was formed in 1997 to regulate the UK's financial services sector and some analysts have suggested there may be political reasons for Lord Turner to be tough on the City at the moment. Do you think a new banking tax is a good idea? Do you work in the financial sector? You can send us your views and experiences using the form below:
"[The comments] may be a ploy to persuade Mr Osborne and the Conservatives that, were they to be elected, they should retain the FSA rather than pass the baton for regulation to the Bank of England, which is one of the shadow cabinet's proposals," James Bevan from CCLA Investment Management told the BBC. A selection of your comments may be published, displaying your name and location unless you state otherwise in the box below.
class="lp" href="http://news.bbc.co.uk/1/hi/talking_point/default.stm">HAVE YOUR SAY It may prove counter productive as business may move away to a more conducive environment Jacques, UK class="" href="http://newsforums.bbc.co.uk/nol/thread.jspa?forumID=6924">Send us your comments name="say">
This is not the first time Lord Turner has spoken out against large bonuses in the banking sector. He said back in June that the FSA had "concerns" about executive pay. The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide. href="http://www.bbc.co.uk/terms/">Terms & Conditions
And on 12 August, the FSA said it was introducing new rules to ensure bank bonuses were not guaranteed for more than a year, and that senior employees should have their bonuses spread over three years.
These rules are due to come into effect from January.
Lord Turner's opinions on the issue carry particular weight because he is both chairman of the financial regulator and a City insider who used to hold senior positions at both Standard Chartered and Merrill Lynch.