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Published: Sunday November 15, 2009 MYT 7:22:00 AM
Updated: Sunday November 15, 2009 MYT 7:29:01 AM

UK Treasury chief vows new law on bank bonuses


LONDON (AP): The British government will announce legislation next week giving regulators the power to stop bankers from pocketing big bonuses that could destabilize the financial system, a newspaper reported Saturday.

Treasury chief Alistair Darling told the Sunday Telegraph that the new Financial Services Bill will allow financial watchdogs to cancel pay packages that reward undue risk-taking.

The bill is due to be announced Wednesday as part of the Queen's Speech, in which the government lays out its plans for the next session of Parliament.

Darling was quoted as saying that the legislation would give the Financial Services Authority the power to cancel contracts that breach a banking remuneration code agreed by the Group of 20 nations earlier this year. The regulator could fine banks that fail to comply.

"Bonuses have been a symptom of the excessive behavior of some banks over the last few years and even over the last few months," Darling was quoted as saying.

He said he would be "giving the FSA powers if necessary to tear up contracts that would result in payments being made that would cause instability."

The new rules would apply to British banks and to the British operations of global investment banks like Goldman Sachs. They have already agreed to abide by the G20-approved rules, which link bonuses to long-term performance.

The bill must be approved by Parliament before becoming law, and could be derailed if it is not passed before the next national election, which must be held by June.

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