British opposition urges bank bonus reforms

October 27, 2009 08:07:42 AM

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Britain's main opposition Conservatives, tipped to win a general election next year, called on Monday for banks to divert cash from their bosses' bonus packages to loans for hard-up families and businesses.

Shadow finance minister George Osborne urged the government and regulators to "stop retail banks -- in other words the banks that lend directly to businesses and families -- paying out profits in significant cash bonuses."

"The cash that would have been paid out should be put on to banks' balance sheets explicitly to support new lending," added Osborne, who would be chancellor of the exchequer in a Conservatives government, in a speech to business leaders.

"There can be no justification for using taxpayer support and guarantees to pay cash into the bank accounts of bankers when the rest of the economy is in such desperate need of that cash."

The global credit crunch that has crippled Britain's important financial sector forced Prime Minister Gordon Brown's government to consider major banking reforms after it nationalised several big lenders.

Britain is suffering one of its worst recessions since World War II, recording six quarters of contraction in a row.

"We cannot wait for the prime minister's promised land of a new responsible bonus culture which looks more remote than ever," Osborne said on Monday.

"We need to take emergency steps to support bank lendig and move the economy forward this winter."

The government defended its stance, citing what it said were tough measures on bonuses enforced on retail and investment banks.

"We have gone further than any other country in the world in rules on bankers' pay," said senior Treasury secretary Liam Byrne.