Banks 'must reveal £1m earners'

Is It Just Me Or Is Everything Shit?: The Encyclopedia of Modern Life

Banks 'must reveal £1m earners'

Banks 'should disclose number of workers earning £1m'

The Walker Review was commissioned in February

The UK's banks should be forced to publicly disclose the number of their employees who earn more than £1m per year, a report has concluded.

That is one of the main findings of the government-commissioned Walker Review into the corporate governance of banks.

Sir David Walker, who led the report, also said non-executive directors needed more power to monitor banks' risk taking and pay deals.

The government said it would now move to implement Sir David's proposals.

Specifically, it is to include his call for banks to have to disclose how many staff earn more than £1m in its Financial Services Bill.

FROM THE TODAY PROGRAMME Cannot play media.You do not have the correct version of the flash player. Download the correct version More from Today programme

This Bill is also planning to give the City watchdog - the Financial Services Authority (FSA) - the power to curb any pay deals in the banking sector that it finds to be excessive.

And under new FSA rules coming into force on 1 January, banks will have to limit the minimum bonus deals of senior staff to just one year.

These new guidelines will also call on banks to claw back a person's bonuses in the result of poor performance.

In addition the new FSA guidelines say senior executives should have between 40% and 60% of their bonus payments deferred over three years, with at least 50% paid in shares.

'Blocking powers'

The Walker Review was commissioned by the government in February following the crisis in the UK and global banking sector, much of which was blamed on excessive risk taking and bonus payments.

The fundamental change needed is to make the boardroom a more challenging environment than it has often been in the past Sir David Walker

The review also calls for:

• A bank's remuneration committee should have direct responsibility for the pay of all high-paid employees

• Board-level risk committees chaired by a non-executive. (Non-executive directors are appointed from outside a company to sit on its board and scrutinise its performance)

• Risk committees to have power to scrutinise and if necessary block big transactions

• Chairman of remuneration committee to face re-election if annual report gets less than 75% approval

• Non-executive directors to spend up to 50% more time on the job

• Chairman of the board to face annual re-election

• Institutional investors to be more active in monitoring the banks.

David Cumming, head of UK equities at Standard Life Investments - which controls £150bn worth of investments - said he accepted the criticism that shareholders may not have exerted enough control in corporate governance.

"Most institutions didn't do enough to intervene, particularly in terms of the banks, but I think one of the assumptions here is that we're going to get it right as well," he said.

"If you go back to 2006-2007, a lot of shareholders were pushing financial institutions and other companies to take on a lot of debt and go for it, so I think engagement is a good thing but we can't assume that it will solve everything."

'Tough questions'

In his report, Sir David said: "The fundamental change needed is to make the boardroom a more challenging environment than it has often been in the past.

"This requires non-executives able to devote sufficient time to the role in order to assess risk and ask tough questions about strategy."

Chancellor Alistair Darling said Sir David's proposals were "the blueprint for how banks must be run in the future".

CBI director general Richard Lambert said he welcomed the report's recommendations.

"Sir David Walker has set out a sensible package of proposals that can strengthen the role of boards in identifying and managing risk," he said.

"In particular, we welcome the emphasis on ensuring balanced boards which are also equipped with the right skills, and on ensuring investors are active and engaged in scrutinising business strategy."

City law firm CMS Cameron McKenna said it was likely that many of the Walker Review's recommendations would be added to the FSA's rules.