A cross-party panel of British lawmakers said it is “inappropriate” for banks to award staff large bonuses and reap excessive profits while they rely on support from taxpayers.
British banks, which have received more than 1 trillion pounds ($1.6 trillion) of government bailouts guarantees since 2008, benefit from an “implicit expectation” that taxpayers will rescue them, the House of Commons Public Accounts Committee said in a report published in London today. No new mechanism has been developed that would transfer that risk to shareholders and bondholders, the committee said.
“It is inappropriate for banks dependent on taxpayer support to be generating excessive incomes, unnecessary bonuses or dividends at the expense of exiting public support,” Margaret Hodge, a lawmaker from the opposition Labour Party who chairs the panel, said in a statement.
Prime Minister David Cameron’s government is urging banks to show restraint as it pushes through the deepest cuts in public spending since World War II. Public backing for banks was reduced to 512 billion pounds as of December, Hodge said.
“There must be an end to the dependence of the banks on taxpayer support,” she said.
Barclays Plc gave its chief executive Robert Diamond as much as 10.1 million pounds in salary, bonuses and stock, while HSBC Holdings Plc planned to pay Chief Executive Officer Stuart Gulliver as much as 13.3 million pounds this year.
In a separate report, the same parliamentary committee called for the Treasury to take steps to safeguard taxpayers’ interests in one of the support programs known as the Asset Protection Scheme, which insured potentially toxic bank loans.
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