A STRING of major overseas banks have agreed to back tougher international rules to curb pay and bonuses after pressure from the UK government.
The Treasury yesterday said that 11 banks, including Bank of America, Goldman Sachs and JP Morgan – which yesterday posted a 581 per cent surge in third-quarter profits – had signed up to the G20 recommendations drawn up last month.
Under the pla
ns, bonus payouts have to be spread over at least three years, with provisions allowing them to be clawed back if performance falters in subsequent years.
The agreement follows a series of meetings held by City minister Lord Myners as part of efforts to prevent a return to the pre- crisis bonus culture as the US bank reporting season begins.
Britain's five biggest banks signed up to the new G20 agreement last month, but there were doubts about gaining support from international groups which have a presence in London, over which UK regulators have less power.
The Treasury said eight banks – Bank of America Merrill Lynch, Citigroup, Credit Suisse, Goldman Sachs, JP Morgan, Morgan Stanley, Nomura and UBS – had confirmed their commitment to the Financial Services Authority's (FSA) pay rules, which come into force at the start of the new year, and their full support for the G20 agreement.
The FSA said Germany's Deutsche Bank and French groups BNP Paribas and Societe Generale would also stick by the G20 reforms and, furthermore, would voluntarily comply with the FSA code.
Lord Myners said: "I am pleased that the most significant banking institutions operating in the UK have moved quickly and are supporting our implementation of the agreement reached on bank remuneration at the G20, and this reinforces the standard we have set for other financial institutions and countries to follow."
There have been mounting concerns that a recovery in bank earnings will herald a return to huge City pay deals. This view was reinforced by news of JP Morgan's leap in third quarter profits to $3.6 billion (£2.3bn), with Goldman Sachs expected to follow with a similar bumper result today.
