Lib Dems to cap banker cash bonuses at £2,500 in 'Big Bang' crackdown on City greed

Liberal Democrat leader Nick Clegg today unveiled plans to crack down on 'obscene' bankers' bonuses, warning there would be 'no reward for failure'.

Mr Clegg said he wanted to see a change in the City of London 'as fundamental as the Big Bang of the 1980s'.

Under the Liberal Democrats, all bonuses over £2,500 would have to be paid in shares and there would be no bonuses at all at board level.

Nick Clegg

Crackdown: Lib Dem leader Nick Clegg today said that there should be no reward for failure in the banking system

Any loss-making financial institution would not be allowed to pay discretionary bonuses.

And the names of all bank staff who have pay and bonuses greater than the Prime Minister's salary - just under £200,000 - would be published.

At a press conference in London, Mr Clegg said: 'I want to see fundamental reform to Britain's banks. Only by transforming the banking industry from top to toe can we start to build a new economy.

'I make no apologies for the fact this will mean big changes in the City of London. I want to see a change as fundamental as the Big Bang of the 1980s, for the better, not the worse.

'I want to focus today on one particular issue: bankers' bonuses. They have become symbolic of the culture of greed and excess that dominated the City in the build-up to this crisis.

'We have a five-point plan to finally bring the bonus culture in banking under control.'

He added: 'Liberal Democrats will ensure the bonus system can never again encourage banks to behave recklessly.

'Ultimately our plans to break up the banks and make the banking industry more competitive will bring an end to the excess profits of the investment banking system and the massive bonus payouts that come with it.

'But we should not wait. Bankers must understand that, after the billions pumped into the banking sector, there can be no financial or moral justifications for the obscene bonuses which are still being paid out.'



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The Lib Dems believe that too many banks think it is acceptable to return to 'business as usual' after the global financial meltdown.

Bonuses, which were 'in part responsible' for the recession, continue to be paid out by all major banks despite many still making losses.

The bonus system actively encouraged bankers to put short-term profit far ahead of long-term stability and growth, the party believes.

The Lib Dems' five-point plan to tackle bankers' bonuses is:


All bonuses in excess of £2,500 to be paid in shares which would only be redeemable after five years. It would be written into the right of entitlement of these shares that they would revert to the company if they were pledged or used as security prior to the date of their redemption.


This does not mean board directors should not be well-paid but that they should have the long-term interests of a company at heart and 'bonus payments do not encourage this'.


Extend the Financial Services Act to ensure that no regulated institution which has made a loss can pay discretionary bonuses.


Require the publication of the names of all bank staff who have pay and bonuses greater than the Prime Minister's salary.


Extend the powers of the Financial Services Authority to ensure that directors of banks are personally fined if their institution breaks the current code of practice for remuneration.

Mr Clegg said the Lib Dem manifesto, to be unveiled tomorrow, would reveal a 'new approach' to a financially stable economy, based on equity not debt - 'where we learn as a country to build things again, not just bet on things on computer screens in the City of London'.

The problems in the economy had started with the banks so the solution would start with the banks too, he said.

'The implosion in the British banking system was a classic example of a vested interest, a clique of one industry holding a gun to the head of the rest of the British economy.

'Yet, despite all the talk about cleaning up the banking system, all the elements are still in place for that implosion to happen all over again.

'Our view is that we simply don't have the luxury in this country not to reform the banking system in this country from top to toe.'

The Conservatives would 'say little' about bank reforms, Mr Clegg warned.

Under a Tory government, a banker would 'get off scot-free' and only millionaires would get tax breaks.

The Lib Dems would enforce levies on banks to ensure they lent to viable businesses.

And they would structurally separate high-risk banks from retail banks to make sure that 'never again are your everyday savings held hostage by the obscene greed and risk-taking by bankers in the City of London'.

But today Mr Clegg focused on the 'outrage' of bankers' bonuses.

'Bankers must understand that making huge bonuses - subsidised directly and indirectly by the taxpayer while viable British businesses are being starved of cash, people are losing their jobs, homes are being repossessed - is morally obscene,' he said.

Mr Clegg said the five-point plan would 'transform the culture of greed that continues to disfigure the banking system in this country'.

He added: 'Of course, a healthy financial sector is crucial to the long-term sustainability and growth of the British economy.

'But we cannot have a sustainable growing British economy as long as the incentives in the banking system are still aimed at lining the pockets of bankers and not providing loans at reasonable rates to British households and British businesses.

'Quite simply, we want to see the banking system become the servant not the master of the British economy.'

Lib Dem Treasury spokesman Vince Cable said it was the right time to talk about bankers' bonuses as financial institutions were currently drawing up their bonus strategies for the next quarter.

'It matters because we're not here talking about incentive payments in other industries, we're talking about payments which are either directly made by the taxpayer in state-owned banks or, in the case of private banks, are underwritten by the taxpayer, something which is effectively insured,' he said.

'So we have a direct interest in bonus payments.'

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