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Banks 'must reveal £1m earners' Banks 'must reveal £1m earners'
(30 minutes later)
The UK's banks should be forced to publicly disclose the number of their employees who earn more than £1m per year, a report has concluded.The UK's banks should be forced to publicly disclose the number of their employees who earn more than £1m per year, a report has concluded.
That is one of the main findings of the government-commissioned Walker Review into the corporate governance of banks.That is one of the main findings of the government-commissioned Walker Review into the corporate governance of banks.
Sir David Walker, who led the report, also said non-executive directors needed more power to monitor banks' risk taking and pay deals.Sir David Walker, who led the report, also said non-executive directors needed more power to monitor banks' risk taking and pay deals.
The government said it would now move to implement Sir David's proposals.The government said it would now move to implement Sir David's proposals.
Specifically, it is to include his call for banks to have to disclose how many staff earn more than £1m in its Financial Services Bill, which was first unveiled in last week's Queen's Speech. Specifically, it is to include his call for banks to have to disclose how many staff earn more than £1m in its Financial Services Bill.
This Bill is also planning to give the City watchdog - the Financial Services Authority (FSA) - the power to curb any pay deals in the banking sector that it finds to be excessive.This Bill is also planning to give the City watchdog - the Financial Services Authority (FSA) - the power to curb any pay deals in the banking sector that it finds to be excessive.
The fundamental change needed is to make the boardroom a more challenging environment than it has often been in the past Sir David WalkerThe fundamental change needed is to make the boardroom a more challenging environment than it has often been in the past Sir David Walker
And under new FSA rules coming into force on 1 January, banks will have to limit the minimum bonus deals of senior staff to just one year.And under new FSA rules coming into force on 1 January, banks will have to limit the minimum bonus deals of senior staff to just one year.
These new guidelines will also call on banks to claw back a person's bonuses in the result of poor performance.These new guidelines will also call on banks to claw back a person's bonuses in the result of poor performance.
In addition the new FSA guidelines say senior executives should have between 40% and 60% of their bonus payments deferred over three years, with at least 50% paid in shares.In addition the new FSA guidelines say senior executives should have between 40% and 60% of their bonus payments deferred over three years, with at least 50% paid in shares.
'Blocking powers''Blocking powers'
The final report of the Walker Review also says that large institutional investors should be more active in monitoring the banks. The Turner Review was commissioned by the government in February following the crisis in the UK and global banking sector, much of which was blamed on excessive risk taking and bonus payments.
In addition, it calls for: The review also calls for:
• A bank's remuneration committee should have direct responsibility for the pay of all high-paid employees• A bank's remuneration committee should have direct responsibility for the pay of all high-paid employees
• Board-level risk committees chaired by a non-executive. (Non-executive directors are appointed from outside a company to sit on its board and scrutinise its performance)• Board-level risk committees chaired by a non-executive. (Non-executive directors are appointed from outside a company to sit on its board and scrutinise its performance)
• Risk committees to have power to scrutinise and if necessary block big transactions• Risk committees to have power to scrutinise and if necessary block big transactions
• Chairman of remuneration committee to face re-election if annual report gets less than 75% approval• Chairman of remuneration committee to face re-election if annual report gets less than 75% approval
• Non-executive directors to spend up to 50% more time on the job• Non-executive directors to spend up to 50% more time on the job
• Chairman of the board to face annual re-election. • Chairman of the board to face annual re-election
• Institutional investors to be more active in monitoring the banks.
David Cumming, head of UK equities at Standard Life Investments - which controls £150bn worth of investments - said he accepted the criticism that shareholders may not have exerted enough control in corporate governance.
"Most institutions didn't do enough to intervene, particularly in terms of the banks, but I think one of the assumptions here is that we're going to get it right as well," he said.
"If you go back to 2006-2007, a lot of shareholders were pushing financial institutions and other companies to take on a lot of debt and go for it, so I think engagement is a good thing but we can't assume that it will solve everything."
'Tough questions''Tough questions'
"The fundamental change needed is to make the boardroom a more challenging environment than it has often been in the past," said Sir David. In his report, Sir David said: "The fundamental change needed is to make the boardroom a more challenging environment than it has often been in the past.
"This requires non-executives able to devote sufficient time to the role in order to assess risk and ask tough questions about strategy.""This requires non-executives able to devote sufficient time to the role in order to assess risk and ask tough questions about strategy."
Chancellor Alistair Darling said Sir David's proposals were "the blueprint for how banks must be run in the future".Chancellor Alistair Darling said Sir David's proposals were "the blueprint for how banks must be run in the future".
CBI director general Richard Lambert said he welcomed the report's recommendations.CBI director general Richard Lambert said he welcomed the report's recommendations.
"Sir David Walker has set out a sensible package of proposals that can strengthen the role of boards in identifying and managing risk," he said."Sir David Walker has set out a sensible package of proposals that can strengthen the role of boards in identifying and managing risk," he said.
"In particular, we welcome the emphasis on ensuring balanced boards which are also equipped with the right skills, and on ensuring investors are active and engaged in scrutinising business strategy.""In particular, we welcome the emphasis on ensuring balanced boards which are also equipped with the right skills, and on ensuring investors are active and engaged in scrutinising business strategy."
City law firm CMS Cameron McKenna said it was likely that many of the Walker Review's recommendations would be added to the FSA's rules.City law firm CMS Cameron McKenna said it was likely that many of the Walker Review's recommendations would be added to the FSA's rules.
The Turner Review was commissioned by the government in February following the crisis in the UK and global banking sector, much of which was blamed on excessive risk taking and bonus payments.