Britain probing link between bonuses, risk-taking

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  by Prashant Rao Prashant Rao
  
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  1 hr 31 mins ago

AFP/File – A man is seen at a branch of the Royal Bank of Scotland.
Britain announced it will look into whether …

LONDON (AFP) –
Chancellor of the Exchequer Alistair Darling
announced an investigation Sunday into whether the promise of big
bonuses lured bankers into taking excessive risks, precipitating the global financial crisis.

In a wide ranging review of how banks are managed, the Treasury department said former City regulator Sir David Walker will also report on how bank boards operate and on Britain's general approach to banking.

Britain has already launched two rounds of bank bailouts worth hundreds of billions of pounds which have seen the government take huge stakes in household names such as the Royal Bank of Scotland (RBS).

But reports that RBS is considering paying its staff one billion pounds in bonuses have sparked outrage.

"They have to understand that these banks would not be here but for the
British taxpayers, therefore they have to show the degree of restraint
that people would expect," Darling told the BBC.

He said "absolutely no figure has been agreed" with RBS on bonuses,
adding: "If we are providing money then the public are entitled to see
something in return."

Darling is expected to announce full details of the probe on Monday. Writing in the Sunday Telegraph newspaper, he said he was "setting up an independent review which will examine how banks are managed".

He said the review would "make recommendations about the effectiveness of risk management by banks' boards, including how pay affects risk-taking".

"Of course, no government should try to remove risk-taking from the
system," he wrote. "Nor would we want to. But government can act to
protect people when excessive risk-taking threatens us all."

Officials at the Treasury said Walker would begin his investigations
soon, but his final recommendations were not expected until the end of
the year.

George Osborne, finance spokesman for the main opposition
Conservatives, criticised the government for acting too late on
bonuses, saying its response was "totally inadequate". "They should
stop dithering and act," he said.

Prime Minister Gordon Brown, himself a former finance minister,
said this week that he expects banks' decisions on bonuses "to reflect
the conditions of the economy and the performance of the banks".

"There are no rewards for failure in what we are proposing," he said.

Former Labour deputy prime minister John Prescott on Sunday launched an online campaign to build up

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