The new finance body set up to guard taxpayers’ interests in government funded banks will scrutinise pay and remuneration policies to ensure they do not reward failure or encourage excessive risk.
The UK Financial Investments Ltd (UKFI), was set up to be a commercial guardian of taxpayers’ interests following the government’s £37bn stakes in banks such as the Royal Bank of Scotland and Lloyds TSB.
UKFI has said the way bankers have been paid are at the heart of the financial crisis and many employees working in the banking sector have chased ‘lucrative deals’ with not enough consideration for the risks involved.
The move comes at a time when employees from Goldman Sachs, Morgan Stanley, Merrill Lynch and Dresdner Kleinwort reportedly shared a £6.4bn bonus pool last week.
John Kingman chief executive of UKFI said: “It is unavoidably true that too many bankers have been paid too much to do apparently lucrative deals without worrying enough about the risks.
“We will take a close interest in bankers’ pay. We must be clear-thinking about this: large global banks need talented people, and such people need to be competitively paid. Equally the way bankers have been paid is at the heart of this crisis. Many bankers have had powerful but ultimately destructive incentives to run risk for which others, including taxpayers, have had to foot the bill. That is not acceptable and has to change.”