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Britain announces tougher new rules on bankers' bonuses

Britain has unveiled new rules which will allow British banks to reclaim employee bonuses for up to 7 years after they are awarded in cases of serious recklessness.

LONDON: British banks will be able to reclaim employee bonuses for up to seven years after they are awarded in cases of serious recklessness, under rules unveiled by the Bank of England on Wednesday (July 30).

Bankers found guilty of "causing a bank to fail" can already be sentenced to prison and fined, but could now be forced to hand over their bonuses, even if in the form of stocks that were subsequently cashed and spent.

Banks already have the option to defer payment of bonuses, which can be double the basic annual salary, for three to five years, but will now have the power to claw back cash already paid out. The move was introduced in response to the scale of recklessness revealed by the financial crisis and recent rate-rigging scandals that have plagued the nation's banks, and which took several years to be exposed and punished.

"Holding individuals to account is a key component of our job as regulators of banks," said Andrew Bailey, the BoE's deputy governor for prudential regulation. "The combination of clearer individual responsibilities and enhanced risk management incentives will encourage individuals in banks to take greater responsibility for their actions," he added.

Managers found guilty of taking a "reckless decision" which brings about the demise of a financial institution will now face criminal charges and up to seven years in prison under new rules announced recently.

The British Bankers' Association complained that the rules would weaken London's position as a global financial centre, but the head of banking group Barclays welcomed the tougher rules. "I believe that banks have to regulate themselves and that's why culture is so important, so that banks do the right business in the right way," said Barclays CEO Antony Jenkins.

"I would say that in principle, I support the idea that where there is wrongdoing, there should be appropriate punishment. If that's criminal wrongdoing, it should be criminal, if it's recklessness, that should be punished also, so I'm not against the concept of clawback," he added.

High Street giant Lloyds Banking Group said on Monday it will pay  £218 million (S$459 million) in fines to British and US regulators, becoming the latest global lender to be fined for rigging inter-bank lending rates. Lloyds's settlement is the seventh joint penalty handed out by the US and Britain as part of a long-running probe into attempts to manipulate benchmarks that set rates for trillions of dollars of financial transactions.

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