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Brown calls for bank bonus reform Brown calls for bank bonus reform
(about 3 hours later)
Prime Minister Gordon Brown has said that the culture of bank bonuses should be geared towards long-term success.Prime Minister Gordon Brown has said that the culture of bank bonuses should be geared towards long-term success.
In an interview with the Financial Times, Mr Brown also said banks should be able to "claw back" bonuses if the bank later performed poorly.In an interview with the Financial Times, Mr Brown also said banks should be able to "claw back" bonuses if the bank later performed poorly.
He called for international co-ordination on the issue, but said he was not in favour of French proposals for a mandatory cap on banker pay.He called for international co-ordination on the issue, but said he was not in favour of French proposals for a mandatory cap on banker pay.
The G20 will discuss bonuses at its meeting later this month in the US.The G20 will discuss bonuses at its meeting later this month in the US.
Mr Brown also agreed with many economists that the UK economy appears to be improving.Mr Brown also agreed with many economists that the UK economy appears to be improving.
"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," he 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," he said.
'Overheated''Overheated'
Mr Brown told the FT that regulators should also be able to ensure that financial institutions held on to higher cash reserves.Mr Brown told the FT that regulators should also be able to ensure that financial institutions held on to higher cash reserves.
Remuneration has got to be based on long-term success, not short-term speculative deals Gordon Brown Can a deal on bonuses be reached?
But while he said the City had "overheated", he declined to support the words of the head of UK watchdog the Financial Services Authority (FSA), Lord Turner, who said in an interview published last week that the financial services sector had "grown beyond a socially reasonable size".But while he said the City had "overheated", he declined to support the words of the head of UK watchdog the Financial Services Authority (FSA), Lord Turner, who said in an interview published last week that the financial services sector had "grown beyond a socially reasonable size".
Mr Brown said it was important to protect London's status as a world financial hub.Mr Brown said it was important to protect London's status as a world financial hub.
"Remuneration has got to be based on long-term success, not short-term speculative deals," Mr Brown said. "There's got to be a clawback system in remuneration."
Lord Turner had also said he would be happy to consider a tax on banks to prevent excessive bonus payments.Lord Turner had also said he would be happy to consider a tax on banks to prevent excessive bonus payments.
In August, the FSA unveiled a new code that stated bonuses should not be guaranteed for more than a year.In August, the FSA unveiled a new code that stated bonuses should not be guaranteed for more than a year.
Senior employees should have their bonuses spread over three years under the code, which is due to take effect from January 2010.Senior employees should have their bonuses spread over three years under the code, which is due to take effect from January 2010.
The new rules, to link pay more closely with the long-term profitability of banks, are designed to address concerns that big bonuses led to excessive risk-taking at banks which contributed to the financial crisis.The new rules, to link pay more closely with the long-term profitability of banks, are designed to address concerns that big bonuses led to excessive risk-taking at banks which contributed to the financial crisis.
But the rules have been criticised by some for not going far enough.But the rules have been criticised by some for not going far enough.
Rules proposedRules proposed
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.French President Nicolas Sarkozy has said he will press for tougher controls on bankers' bonuses at the next G20 summit.
Mr Brown said that French proposals were part of a "legitimate debate" on the issue.Mr Brown said that French proposals were part of a "legitimate debate" on the issue.
Chancellor Alistair Darling will be raising the issue at the upcoming summit of G20 finance ministers, which precedes the meeting between the heads of government.Chancellor Alistair Darling will be raising the issue at the upcoming summit of G20 finance ministers, which precedes the meeting between the heads of government.