BANKS should think twice before paying out lavish bonuses this year and must start to refocus on longer-term investment to avoid a repeat of the financial crisis, business secretary Vince Cable said yesterday.
Chancellor George Osborne last week confirmed he would impose a tax on banks’ balance sheets as part of measures to insure the public finances against the cost of future financial crises and to help bring down a record budget deficit.
“No one listening to the chancellor’s statement last week will be under any doubt of the government’s collective determination to ensure that banks act in the interests of the wider economy -- and that, in the new year, they must not engage in another self-indulgent bonus round,” Cable said.
Cable has been one of the most outspoken critics of a banking sector which needed substantial government support during the global credit crisis.
Banks have come under fire since the crisis for continuing to pay out big bonuses despite warnings from policymakers that large pay packets were partly to blame for the risk taking that triggered the credit crunch.
“To align bankers’ interests with customers it is essential that we look at remuneration policy,” Cable said. “The best entrepreneurs often have to wait many years before being able to take money out of [their] firms.
“And for those who say that by crimping the banks’ style, by stopping them indulging in short term speculation, that we are somehow damaging their shareholders’ interests, I want to know: how did short termism work out for you? A glance at the share price graphs around 2008 suggests ‘not very well’.”
City A.M. Reporter