Banking Bill

I thank Mr. Speaker for selecting this new clause. A lot has happened in a short period in relation to the banks and the economy, and the situation has moved on rapidly. However, I do not want to fail to deal with the issue of excessive bonuses, which has rightly enraged the public—our constituents. The new clause addresses that. It refers to the Treasury making"““regulations on the remuneration of senior staff of rescued bank””" such that"““senior staff are given no financial incentive to take unnecessary and excessive risks that threaten the value of the rescued bank””," such that"““a rescued bank may recover from a senior member of staff any bonus or similar payment which is based on statements which are later shown to be materially inaccurate””" and such that"““a rescued bank may make no golden parachute payment to its senior staff.””" That wording is not the whim of a left-wing Labour Back Bencher, nor is it anti-banker vindictiveness, although I feel a bit of that, as do my constituents. Its provisions were written into the $700 billion Paulson bail-out package by the US Congress, and this wording is the closest I can get to that. I thank the Library and the Public Bill Office staff for drafting it in that way. Congress has a Republican majority, but both Republicans and Democrats required those provisions to be included in any bail-out proposal. The truth is that the level of bonuses has been an absolute scandal. It is totally unacceptable that there should be any bonuses if it is taxpayers' money that saved the institution from failure. It is unbelievable that directors are paid for failure and for jeopardising the public interest, at a time when they are costing taxpayers a great deal of money, when they are jeopardising their customers' livelihoods and those of countless businesses and individuals, and when they have got into a situation where the banks own a huge amount of toxic debt and effectively seize up. In those circumstances, bonuses should not be paid—in fact, they should be clawed back from the directors who got the bank into that situation. The new clause would require that no bonuses should be paid for risky activities and that we get some repayment where they have been paid on a false or inaccurate basis. That is what the US Congress said; that is what we should say as well. The new clause applies to the rescued banks package, and I wanted to tie it to the US Congress provisions, but it should apply not only to the rescued banks but to all the banks. They are all part of the bail-out process. Even if they are not benefiting from the direct recapitalisation in terms of preference shares, other parts of the package referred to £200 billion being available in short-term loans from the Bank of England—that went up from £100 billion—and to £250 billion in loan guarantees being made available at commercial rates to encourage banks to lend to each other. Those are huge sums of public money that have gone to banks other than the rescued banks that we have taken preferential shares in, and they should also be subject to restraint and control over bonuses.