British PM vows legislation to transform policing of banking sector

• Source: Global Times
• [02:30 November 16 2009]
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British Prime Minister Gordon Brown promised Sunday to introduce legislation to "transform" the policing of Britain's financial sector when his government sets out its political program this week.

Brown said a Financial Services Bill would offer tough new powers to regulators to tear up bankers' contracts if they include excessive pay and bonus deals that might threaten the stability of the financial system.

Some observers blame the bonus culture of the world's two pre-eminent financial sectors – the City of London and Wall Street – for encouraging excessive risk-taking, which helped tip the global economy into chaos.

Speaking in a podcast on the Downing Street website ahead of Wednesday's policy-setting Queen's Speech in parliament, Brown said Britain, despite still being in recession, had a "bright future" ahead after the economic turmoil last year.

Chancellor of the Exhequer Alistair Darling said the Financial Services Authority (FSA), the financial sector watchdog, would be given new powers to stop bankers collecting excessive bonuses or to cancel pay packages that rewarded undue risk-taking.

Legislation to be unveiled Wednesday will also enable the FSA to require banks to renegotiate remuneration packages that breach its pay code, and fine those that continue to offer unjustifiable sums.

"This means a transformation of the way the financial sector is policed, with banks themselves and not the taxpayer made to pay for bank failings."

The new rules will come into effect next year if the Bill completes its passage through parliament before the election – which must be held by June 3.

The rules would affect all new contracts and would apply to all British banks, includ-ing RBS, Lloyds, Barclays and HSBC, as well as the British operations of global investment banks like Goldman Sachs.

AFP