Monday February 9, 01:34 PM
Britain's Brown hails end of bankers' bonus culture
By Katherine Haddon
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LONDON (AFP) - British Prime Minister Gordon Brown called time on Monday on the current culture of big bonuses for City of London (LSE: CIN.L - news) bankers.
"The old short-term bonus culture is gone," he told a conference in London. "No rewards for failure, rewards only for long-term and sustainable success, the old bonus culture removed and a new culture that rewards sustainable success brought in."
Brown said that board members of British banks who have received state help would not receive cash bonuses this year, while banks would not pay or receive dividends either.
But the situation seems to be different among more junior members of staff, including traders.
Chief Secretary to the Treasury Yvette Cooper told the BBC on Monday that some banks had "legal obligations they can't get out of" to pay bonuses.
But she added that bankers at firms which received state help had a "moral responsibility" to forego their bonuses.
Finance minister Alistair Darling said on Sunday that the government will hold a review of whether big bonuses lured bankers into taking excessive risks which triggered the credit crunch. He was expected to give more details on Monday.
Criticism of the plan is growing among opposition politicians, who have accused the government of delaying tactics.
George Osborne, finance spokesman for the main opposition Conservatives, said the plan was a "totally inadequate" response.
"The problem of bonuses in the government-owned banks has been looming for months, but now they have set up another review that will be far too late to do anything about this year's bonuses," he said.
"They should stop dithering and act."
Britain has launched two rounds of bank bailouts worth hundreds of billions of pounds and the government has taken huge stakes in household names such as the Royal Bank of Scotland (LSE: RBS.L - news) (RBS).
Weekend reports that RBS, which is 68-percent state owned, is considering paying its staff about one billion pounds (1.48 billion dollars, 1.14 billion euros) in bonuses have sparked outrage.
Barclays Bank (NYSE: BCS-P - news) , which did not take state money, posted a profit of 4.38 billion pounds on Monday. It said its executive directors would receive no bonuses for 2008 and that it was reviewing future compensation policies.
In his first comments since the review was announced, Brown said there must be "no rewards for failure".
He said: "I believe that as a society we should support hard work, enterprise and responsible risk-taking but... we should punish irresponsible risk-taking." And he vowed "aggressively" to pursue a "no rewards for failure policy".
But there was embarrassment for the government on Monday as the Times (1832.HK - news) newspaper reported that UK Financial Investments (UKFI), the body set up to oversee the state bailout of banks, would pay bonuses to its staff of mainly financiers and Treasury officials if they performed well.
Britain has launched two rounds of bank bailouts during the credit crunch -- a 37-billion-pound recapitalisation scheme in October and a second last month reported to be worth around 200 billion pounds.
RBS said last month that it expected an annual loss of up to 28 billion pounds in 2008 -- a record in British corporate history.
The government also holds 43 percent of the Lloyds Banking Group, made up of merged lenders HBOS and Lloyds TSB, and Northern Rock (LSE: GB0001452795.L - news) was nationalised last year.
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