Banking Bill

My hon. Friend the Member for Leyton and Wanstead (Harry Cohen) has raised an important subject of significant public concern. The Prime Minister has said that he wants to see an end to the reckless City bonus culture. I assure him that the Government have already implemented certain conditions concerning the remuneration policies of the three banks that participated in recapitalisation, and those conditions apply in both the short and long terms. In 2008, the Government expect no cash bonus to be paid to board members of those banks. Incentive schemes will be reviewed and linked to long-term value creation, taking account of risk and restricting the potential of rewards for failure. Any firm participating in the recapitalisation scheme will be bound by the FSA code on non-executive, risk-based remuneration, as well as by industry best practice on executive remuneration and severance—for instance, the guidance issued by the CBI and the Association of British Insurers. That will help to ensure that remuneration policies are aligned with sound risk management systems and controls, linking earnings to the creation of long-term value not short-term indicators, thereby protecting the interests of taxpayers and shareholders. The three banks currently participating in the recapitalisation scheme have signed up to those conditions. As the Chancellor made clear in his statement on the bank recapitalisation scheme on 18 November, any provision of capital under the scheme in the future to other eligible financial institutions will carry terms and conditions that appropriately reflect the financial commitment made by the taxpayer, including terms and conditions on remuneration.