Britain's banks should consider their wider responsibility to society and "soft" government guarantees that have helped to support them before deciding on bonus payouts later this year, the financial regulator said today.
As bonuses for bankers look set to jump in 2009, the comments were seen as a warning shot to Barclays and HSBC, who have avoided direct government help, as well as part-nationalised banks like Royal Bank of Scotland.
"There is this wider question as to whether, given banks are arguably still in receipt of some form of underpinning, soft guarantee, they should recognise this in their bonus policies," Financial Services Authority (FSA) Chief Executive Hector Sants told BBC radio.
"Personally, I think they should recognise their wider responsibility to society. They should recognise what has happened in the last few years and they should recognise that without the interventions made by government and taxpayers around the world, the situation they would be in now would be far worse."
He added: "I think it would be reasonable for them to take that into account as they go into their bonus rounds."
Britain's top banks have agreed to pay out more in shares and subject awards to clawback and deferral, but there is no cap on payouts and after buoyant investment banking activity so far this year there are expected to be multi-million pound payouts for many top bankers.
US bank Goldman Sachs last week reignited the debate about excessive compensation after setting aside $5.4 billion for pay in the third quarter alone. It is on course to pay out $20 billion this year, infuriating critics so soon after repaying $10 billion in taxpayer bailout funds.
Barclays Capital, the investment bank arm of Barclays, is expected to post record profits for 2009 after its successful takeover of the US arm of Lehman Brothers. HSBC's investment bank also had a record first-half, while RBS is offering packages to attract and retain staff at its investment bank, industry sources say.
But British banks could be disadvantaged if Britain imposes tougher bonus requirements than regulators in other countries, the chairman of Barclays warned.
"There is the real risk of regulatory arbitrage," Marcus Agius said in a report in the
Financial Timestoday.
"This is a global financial system. It is fungible. So I am very concerned there should be a level playing field," he said.
Reuters