Carney calls for bankers' bonuses to be deferred 'for a very long time'.

Mark Carney has stepped into the row about bankers' bonuses with a demand that a large chunk of the pay packages for senior staff should be deferred "for a very long time".

Interviewed on the BBC's Andrew Marr Show, the governor of the Bank of England said a change in compensation structures was needed so that banks could see whether employees had taken undue risks or behaved badly.

Carney's comments followed news last week that Barclays was paying bigger bonuses despite announcing plans to shed staff in response to a fall in profits.

The governor declined to talk about specific banks, but said: "Compensation of bankers should be held back and deferred for a very long time. There should be an ability and an expectation that a firm takes back compensation if an individual is found to have taken risks or if there are conduct issues. More pay should be deferred for a longer period."

Carney said Threadneedle Street now had the powers to step in and limit bonus payments if a bank was deemed to have inadequate levels of capital.

He said the Bank was keeping an eye on developments in the housing market, but the recovery in activity and prices were taking place from historically low levels.

"We have to be very conscious of the economic history of Britain, and there is a history of boom and subsequent bust", Carney said, noting that the Bank's financial policy committee had already started to announce measures designed to prevent a bubble from developing.

Carney said the Treasury's Help to Buy mortgage guarantee scheme currently involved only a small number of properties, most of them low-value transactions for first-time buyers outside of London.

But he noted that house prices were now rising in every region of the UK apart from Northern Ireland.

The governor reiterated that the Bank would only start to increase interest rates when the economy was operating at closer to full capacity. "The path of monetary policy, the path of interest rates is going to be calibrated very carefully to ensure that only when we see sustainable growth in jobs, in incomes and in spending, will we make adjustments," he said.

"We can responsibly take our time and only adjust interest rates once more slack has been cut."

Powered by article was written by Larry Elliott, economics editor, for on Sunday 16th February 2014 11.11 Europe/London © Guardian News and Media Limited 2010


image: © Bloomberg

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