The Bank of England will today (30 July) unveil new powers to claw back banker bonuses up to seven years after they have been paid and a new law that would see reckless bankers facing jail time.
According to a paper seen by FTAdviser sister title the Financial Times, the changes to the BoE’s remuneration code would force bankers to hand back their bonuses even if they had spent them.
The new regime includes plans for the payment of bonuses to be deferred for a longer period and for powers to jail bankers for up to seven years if they are found guilty of reckless misconduct.
The plans represent a watered down version of those presented by the BoE in March, after it conceded some points to pressure from the banking industry.
The BoE had previously recommended a clawback period of up to nine years and said bankers could be punished for a “severe downturn in financial performance”, whereas now the seven-year clawback will only apply if there is “reasonable evidence of employee misbehaviour or material error” or if “the firm or the relevant business unit suffers a material failure of risk management”.
Plans to apply the rules retrospectively as first planned have also been scrapped and instead they are due to come into force at the beginning of 2015.
Employment lawyers protested that existing employment contracts would have been difficult to implement.
The move comes as the board of Lloyds Banking Group prepares to meet to discuss withholding pay from traders involved in the Libor rigging scandal. Earlier this week the bank accepted a £105m fine for manipulating rates to cut the cost of a financial crisis rescue scheme.
