City regulators will be able to veto the pay deals of bank executives under new proposals set out today by Alistair Darling.
Addressing MPs in the House of Commons, the Chancellor said that the Financial Services Authority (FSA) will monitor the structure of bankers’ remuneration packages and produce a report on them every year.
Should the City watchdog find that an executive’s pay encourages the financier to take risky investment decisions, it can order the lender to put aside more capital in reserve. Any such requirement would reduce a bank’s profitability and, the Treasury believes, act as an effective veto.
“We need a change of culture in the banks and their boardrooms, with pay practices that are focused on long-term stability and not short-term profit,”