In light of the public and private sector cost-cutting measures currently in place, bank chief executives are being urged to show restraint and compassion when doling out bonuses to their personal and business bank account executives this coming year.
Mark Hoban, the Financial Secretary to the Treasury, said in a recent statement that banks need to be more mindful during the coming months when bonuses have been traditionally handed out in the past. This is especially important since, across the rest of the economic landscape, the implementation of pay restraints has become commonplace.
Hoban also announced that the government is currently exploring options in taxing profits made by banks. As he addressed those gathered at an annual British Bankers’ Association dinner at Mansion House, the minister told the BBA that the government has the opportunity to send clear messages to the public that no longer does the banking industry reward its employees for exposing their investors and taxpayers to long-term risks by encouraging these same employees to focus on short-term performance. He stressed that the UK banking system instead now operates in a fair and stable way, no longer offering mortgages or business loans with sub-prime interest rates, among other questionable tactics employed in the past.
Secretary Hoban also stressed the merits of transparency by stating that banks can easily show that they exist not only to serve their own interests but the whole economy simply by reforming their modus operandi to be more visible to outside scrutiny.
The topic of bonuses has not been without controversy, however. The BBA’s chief executive, Angela Knight, wanting to assure account owners that their bank statements held no surprises for them in the future, responded by stating that bank employee bonuses were already regulated in the UK and that those regulations were implemented using a rubric that incorporated proper performance figures.
Knight defended her industry on BBC Radio 4 recently when she was interviewed on its Today programme, saying that the entire question of pay was regulated the previous year. She stressed that out of the entire G20 group of countries, Britain was the only one to implement such measures. Knight did however offer a mea culpa for the current government deficit, claiming responsibility for the role the banks played in the matter.
Meanwhile, the government is currently considering two new ways to tax banks, Hoban said: they are a “financial activities tax” and a “bank levy.” Originally raised by the IMF earlier this year, both taxes are currently being adopted by governments around the globe.