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City says FSA plan to tear up bank contracts is unlawful

EX-ROYAL Bank of Scotland chairman Sir George Mathewson yesterday added to City concerns over government plans to hand the Financial Services Authority (FSA) the power to rip up bankers&rsquo; pay contracts, labelling them &ldquo;dangerous&rdquo;.<br /><br />Speaking on the BBC, Mathewson said it was &ldquo;sad&rdquo; to see a political move to threaten the banks even as the UK moves out of recession.<br /><br />&ldquo;Interfering with contracts that have been reached between willing participants is a somewhat dangerous route to go down,&rdquo; he said.<br /><br />The stark warning came after the City&rsquo;s legal community warned the policy is unprecedented in UK law.<br /><br />Ronnie Fox, head of law firm Fox, said: &ldquo;If contracts are torn up, the UK has abandoned the rule of law and a free market economy.&rdquo;<br /><br />Denton Wilde Sapte banking partner Brett Hillis said: &ldquo;This goes against the idea of a free market employment contract. The FSA has powers anyway &ndash; it can alter capital requirements if it is not happy with remuneration policy &ndash;so I question if it is necessary.&rdquo;<br /><br />The legislation, which strengthens the FSA&rsquo;s current code on remuneration, will be unveiled in the Queen&rsquo;s Speech to Parliament tomorrow.