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Tories seek bank cash-bonus limit Tories urge bank cash-bonus limit
(about 9 hours later)
High Street banks should be stopped from paying cash bonuses of more than £2,000, shadow chancellor George Osborne is expected to say. High Street banks should be banned from paying bonuses of more than £2,000 in cash, the Conservatives have said.
In a speech to the City, he is to say lending banks should be allowed to pay "significant" bonuses only in shares. Shadow chancellor George Osborne told the BBC the banks should be allowed to give out large bonus payments only in the form of shares in the company.
The Tories claim this could create up to £20bn of new lending that would free up credit for businesses and consumers. The Tories claim this could free-up up to £20bn which could then be lent to businesses and consumers.
But the Treasury accused Mr Osborne of "hypocrisy", adding the Tories had not backed plans to support businesses.But the Treasury accused Mr Osborne of "hypocrisy", adding the Tories had not backed plans to support businesses.
Many believe big bonuses prompted excessive risk-taking at banks which contributed to the financial crisis.Many believe big bonuses prompted excessive risk-taking at banks which contributed to the financial crisis.
'Emergency plan'
Last week, the Centre for Economics and Business Research said City bank bonuses would hit £6bn this year, up from £4bn in 2008, because of rising profits and less competition.Last week, the Centre for Economics and Business Research said City bank bonuses would hit £6bn this year, up from £4bn in 2008, because of rising profits and less competition.
'Emergency steps' Mr Osborne told BBC One's Breakfast: "I'm saying that money should be used to lend out to the economy, to deal with the credit crunch which is still raging in Britain, if not in other countries in the world."
In a speech at Reuters, in Canary Wharf, the shadow chancellor is expected to say the Treasury and Financial Services Authority will be urged to ban big cash bonuses being paid to bankers. We have stopped short of banning all bonuses for retail banks because it is unworkable Liam Byrne, Treasury minister
It is thought that the Conservatives would seek to protect bonuses of less well paid staff who work in bank branches, so would allow bonuses of less than £2,000 to be paid. The measure, described by the Tories as an "emergency" plan, would be temporary and would work alongside the new agreement signed by the banks and the Financial Services Authority (FSA).
The measure, described by the Tories as an "emergency" plan, would be temporary, and would work alongside the new agreement signed by the banks and the FSA. It would only apply to High Street retail banks, which means investment banks would be exempt.
And it would only apply to High Street retail banks, which means investment banks would be exempt.
However, the proposed change would apply to the investment arms of banks that also lend to consumers.However, the proposed change would apply to the investment arms of banks that also lend to consumers.
Mr Osborne is expected to say "emergency steps" need to be taken "to support bank lending and move the economy forward". Mr Osborne said: "Most of these High Street banks are large investment banks... They should be lending out across the economy. They shouldn't be paying out large bonuses."
He added: "You could still pay bonuses, but pay them out in shares in the company, so that if the company does badly you don't get rewarded."
Dividing bonusesDividing bonuses
It is thought he will tell his audience: "The cash that would have been paid out should be put onto banks' balance sheets explicitly to support new lending. It is thought that the Conservatives would seek to protect bonuses of less well-paid staff who work in bank branches, so would allow bonuses of less than £2,000 to be paid in cash.
"This should be a condition of continuing to receive taxpayer guarantees and liquidity support. I am not insensitive to the need of Britain's banks to remain competitive and retain their most talented staff." Mr Osborne, who will give details of the plan in a speech at Reuters, in Canary Wharf, later, said the plans would not affect "branch staff on £12,000", but the better-paid workers, sometimes on six-figure bonuses.
BBC political correspondent Laura Kuennsberg says Mr Osborne will say that where banks want to pay bonuses to senior staff, those bonuses should take the form of "new equity capital", by which he means "shares in the business". The head of the FSA, Lord Turner, expects banks to spell out soon how their bonuses will be divided up.
The head of the FSA, Lord Turner, expects banks very soon to spell out how their bonuses will be divided up. The Treasury criticised Mr Osborne's demands as posturing.
The Treasury has criticised Mr Osborne's demands as posturing. Liam Byrne, chief secretary to the Treasury, said: "Mr Osborne's hypocrisy beggars belief. The Tories have fought against every plan we've delivered to support jobs and businesses.
Liam Byrne, chief secretary to the Treasury, said: "Mr Osborne's hypocrisy beggars belief.
"The Tories have fought against every plan we've delivered to support jobs and businesses. And if we withdraw support now, as Mr Osborne wants, the recession will be longer and deeper.
"We have already introduced the toughest bank remuneration policy in the world. We have stopped short of banning all bonuses for retail banks because it is unworkable, but we are presently negotiating with RBS and Lloyds on the payment of 2009 bonuses"."We have already introduced the toughest bank remuneration policy in the world. We have stopped short of banning all bonuses for retail banks because it is unworkable, but we are presently negotiating with RBS and Lloyds on the payment of 2009 bonuses".