Regulator To Have Power To Tear Up Banker Pay Contracts

Although the UK authorities have said that they do not intent to introduce legislation that caps banker pay, UK Chancellor Alisdair Darling has said that the new financial services bill will enable regulator The Financial Services Authority to set aside banker pay contracts which it deems encourage excessive risk taking.

Reuters reports that Angela Knight, CEO of the British Bankers Association, has said that the government needs to be careful to ensure that any action the government takes over pay does not put the City at a disadvantage vis-a-vis other major financial centres. One banker told Here Is The City: 'Mr Darling may find that he is simply legislating the UK financial sector out of business. It's OK being tough on bonuses, but only if other countries are passing similar measures. This may be a noble cause, but it will look pretty stupid if banks choose to do their business elsewhere'.

In the meantime, Barclays CEO John Varley has told The Sunday Telegraph that banks should be grateful for the public for the bail-out of the financial system, and should act accordingly. He said that without decisive action to restore confidence by authorities around the world, including here in the UK, the banking system would have collapsed. Even those banks who did not take capital from governments clearly benefited (and continue to benefit) from these actions. We are grateful for that, and our behaviour should acknowledge that benefit'.

Finally, JPMorgan looks set to buy the remaining 50% of JPMorgan Cazenove it doesn't already own for around $1.5bn. The Sunday Times reports that around 80 former Cazenove partners (who are now shareholders) will split around $1.08bn, with the rest going to other shareholders, who are mostly current or former employees. Firm chairman David Mayhew is expected to walk off with $33m. JPMorgan paid around $166m for its original 50% stake in the business in 2004.

Reader Comments

1. 'Happy for the politicians to given authority to tear up our contracts, as long as we get the power to kick out under-performing government officials between elections!'.

2. 'The UK cannot afford another bailout, so there's no choice but to elect for less risk going forward. And one of the reasons that London has become one of the major financial centres is that investors have confidence in our institutions and regulators. Strengthening investor confidence by being sensible about risk could end up resulting in a growth in business here'.

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