Bonus clawback plans present a legal minefield

Kate McCann
Follow Kate
PLANS TO clawback bank bonuses, which could see some awards being reclaimed a decade after they are handed out, go too far, a leading industry body has warned.

The British Bankers’ Association (BBA) said in its submission to a consultation yesterday that it would support a broad bonus clawback policy, but that it would be legally difficult to enforce and could end up costing more in legal fees than the amount clawed back.

“It could be argued that such repayment provisions are unenforceable on legal grounds because they are a ‘penalty clause’; and/or a restraint on trade; and/or counter to the doctrine on forfeiture,” executive director of the BBA Simon Hills said in a statement.

He added that the rules should only apply in the most serious cases of personal misconduct. “We do not consider that clawback should be applied to an employee merely where there is ‘reasonable evidence’ of misbehaviour or material error that is untested – to do so would cut across the principle of natural justice,” he said. The BBA’s comments, first revealed by Sky News, came in response to a consultation by the Bank of England’s prudential regulation authority on whether bank bonuses should be reclaimed.