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BoE Unveils Tough Clawback Rules On Bankers' Bonuses

July 30, 2014

LONDON (Alliance News) - The Bank of England on Wednesday outlined plans to tighten bankers' bonus rules that eventually limits their inclination to take high risk.

According to the new proposal, bankers could be forced to pay back their bonuses up to seven years from the date of payment if they break financial conduct rules.

Earlier in March, the BoE had suggested to set the clawback period at six years from the time of receiving the payment.

Currently, bonuses are paid out over a period of three to five years, and it could be clawed back if appropriate. Depending on seniority, the bank today said deferred portion of bonus payment should be made at least in five or seven years.

The consultation on new rules will close on October and it will come into force on January 1, 2015. This new regulatory framework was proposed jointly by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority.

"Clawback is most appropriate in cases where the individual has some responsibility or culpability for the circumstances giving rise to the grounds for action," PRA said. The central bank thus, "narrowed the grounds to exclude a material downturn in financial performance."

The announcement came after Lloyds Banking Group was fined GBP 218 million for rigging market benchmarks, earlier this week.

"As these new rules are amongst toughest in world, we need to be careful we don't create uncertainty which might make it increasingly hard to attract talent to London," said, John Cridland, Director-General of Confederation of British Industry.

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Source: Alliance News

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