The big UK banks need an overhaul to put a stop to the excesses of the current bonus culture,
according to Business Secretary Vince Cable.
Last week the government sealed a deal with the largest British banks to impose limits and
transparency conditions on bonuses for senior staff, with the agreement linked to new business
lending targets. However, some critics have said that the ‘Project Merlin’ deal will be difficult to
enforce.
Liberal Democrat Cable told the BBC at the weekend that the he felt the agreement was “by no
means a finished article”.
He added: “The banks are ultimately underwritten by the state. They effectively have a state
guarantee and that’s what makes the enormous payments so offensive … there will have to be
change and it will have to be radical.”
The level of bonuses paid to senior bank executives and traders has been a public bone of
contention since taxpayer money was used to bail out Lloyds Banking Group and Royal Bank of
Scotland during the financial crisis.
The Independent Commission on Banking is currently considering what changes should be imposed
on the UK banking sector, with the aim to “promote financial stability and competition” in the
market. The Commission is due to return its report to the government later this year.
Vince Cable feels tackling the bonus culture needs to be at the heart of that review. “What we
should notice at the end of it is that banks are more competitive and that they’re safer and that
they’re not making large excess profits which then fuel the bonus culture,” he said.
