LONDON (Reuters) - Regulators should be given the power to penalise banks that pay bonuses to reward short-term deal-making rather than long-term performance, Prime Minister Gordon Brown said on Thursday.
Banks should also be able to "claw back" bonuses from bankers if long-term performance turned out to be poor, Brown told a parliamentary committee.
The credit crunch has forced the government to nationalise two British lenders and take large stakes in several others, leading to a public backlash against bankers who receive large bonuses.
The issue has shot up the political agenda as a result.
"The short-term bonus culture in banks has got to end," Brown said.
"I think the Financial Services Authority (FSA) should be given the right in regulation to penalise a bank which is basing its reward system on short-term dealmaking rather than long-term performance," he said.
"I believe the bonus structure has got to be over a number of years and not over one year, if it is to exist at all in these banks, and at the same time it should never be a one-way bet. In other words if you fail there is a clawback that is also possible within a bonus system," he said.
He did not make clear if he was referring to banks which are part-owned by the state or to all banks.
James Crosby, the former chief executive of HBOS and advisor to Brown, stepped down as deputy chairman of the FSA on Wednesday, saying allegations he ignored risk warnings while at HBOS had already been investigated and had no merit. Continued...
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