Posts No. 142, No. 107 and No. 87 covered corporate governance and exec comp related developments in the UK banking scene. While the consultation period for Sir David Walker's final set of recommendations (for UK banks and other financial institutions) has expired on October 1 but the final document isn't due until November 2009 (for the July 16, 2009 draft go here), the discussion in the UK now focuses on whether or not banks should be allowed to pay the coming bonuses without ex ante disclosure as to amounts and structure.
According to Lord Adair Turner, the current chairman of the UK Financial Services Authority and drafter of the 2009 Turner Review, the answer is no. In an interview to the Sunday Times, Turner clarified that unless the banks disclose the planned bonus payments before the end of the week, no bonuses can be paid and the corresponding funds should be added to the reserves.
Lord Turner, chairman of the Financial Services Authority (FSA), has given Britain’s banks until the end of the week to justify bumper bonus payouts. Banks must provide a detailed breakdown of how bonuses will be split between cash, shares and other forms of payment. Any bank that does not comply could be barred from paying bonuses, and told to use the money to build up reserves, Turner said. “The major trading banks we know are making large profits for exceptional post-crisis reasons . . . we believe we are in a position to achieve capital enhancement without adverse consequences,” Turner said. “The priority use of these large trading profits must be to build up capital levels.”
Some serious muscle-flexing going on here, perhaps triggered by a statement of The Centre of Economics and Business Research that bonuses over 2009 so far rose with 50% compared to 2008 in the British financial sector (go here for the press release and some stats). We saw similar developments - on the muscle-flexing front that is - recently in the Netherlands; check posts No. 143 and No. 138.
For a sceptic take on things, see this background article on how the foolish bonus rage will kill our Goldman Sachs goose.
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