MercoPress. South Atlantic News Agency

Controversy over bankers’ bonuses at Finance minister summit in London

A cap would be “unenforceable”, warned UK Chancellor of the Exchequer Alistair Darling

A cap on bonuses paid to London City bankers would be “enforceable” UK Chancellor of the Exchequer Alistair Darling warned on Friday. Proposals to curb excessive pay and bonuses are being pushed by European nations at the two-day meeting of Finance ministers from the G20 group of major economies being hosted by Mr. Darling in London.

But the Chancellor warned that the simple cap favoured by countries such as France and Germany would not be practical, as top bankers would simply find other ways to reward themselves. And he warned of “implacable” opposition from other countries - thought to include the United States.

Finance ministers of seven European countries - Sweden, France, Spain, Germany, Italy, Luxembourg and the Netherlands - denounced the massive payouts which have been blamed for fuelling excessive risk-taking as “dangerous... indecent, cynical and unacceptable”.

In a joint article for Swedish newspaper Dagens Nyheter, the ministers said that bonuses “should be paid out over a number of years and should mirror the individual's and the bank's actual performance over time”.

Their comments follow Thursday's joint letter from Prime Minister Gordon Brown, French President Nicolas Sarkozy and German Chancellor Angela Merkel, floating means of restraining bonuses, such as limiting them to a proportion of a bank's overall profits or introducing “clawback” mechanisms if deals go wrong over a longer period of time.

The US has given a lukewarm reception to proposals for pay restraint, giving greater weight to the need for measures to increase banks' capital reserves.

Following bilateral talks with US Treasury Secretary Tim Geithner as the summit kicked off, Mr Darling warned that to be effective, any measures need to be “global in scope and practical in action”. Unanimous agreement is needed around the world, because of the multinational nature of the modern banking system, he said.

Asked about a cap, he told Sky News: “I think it is unenforceable. You can have a cap on a bonus, but if somebody really wanted to get around it, they would just raise their basic salary or arrange for money to be paid in some other way. We have got enough experience from countries around the world of what happens with pay policies, especially with people at the top. They are very good at finding a way round it”.