Bank bonuses to be cut under deal

Chancellor George Osborne has announced details of a deal with the “Big Four” banks which he said would see bonuses cut, lending to small business increased and the pay of the highest paid executives published.

Under the deal reached on Wednesday morning with Barclays, Lloyds Group, RBS and HSBC, total bonuses for UK-based staff will this year be lower than in 2010, while banks will be required to publish details of the pay packages not only of board members but also the five highest-paid executives outside the board.

The four banks, as well as Santander, have agreed to increase lending to small businesses by £10 billion to £76 billion and overall lending will increase from £179 billion to £190 billion, the Chancellor told the House of Commons.

And banks will contribute £1.2 billion towards the regional economy, including £200 million to capitalise a new Big Society Bank.

Mr Osborne said he recognised the anger felt by many voters towards the banks, but it was time for Britain to move “from retribution to recovery”.

Mr Osborne told MPs: “The anger at the terrible mistakes of the banking industry and the failure of those who regulated it will long remain, and rightly so.

“But let us as a country confront this hard truth – anger and retribution will not bring one percentage point of growth or create one job. The anger will remain and we must never make the same mistakes again, but Britain must move from retribution to recovery.”

Speaking outside the chamber, Business Secretary Vince Cable said on Wednesday: “Today’s agreement is a good step forward for British business. Banks have made a commitment, with independent monitoring, to increase credit to UK firms and especially to small and medium-sized enterprises.

“Tougher mandatory disclosure rules covering the top eight executives outside of the board will give the UK the most transparent financial regime in the world, while linking executive pay to lending gives businesses a crucial assurance that bank executives have a stake in the real economy.”

Mr Osborne said all four banks had pledged to pay out total bonuses that are not only lower than last year, but lower than they would otherwise have been without the agreement. Heads of the remuneration committees of the banks will have to confirm with the Financial Services Authority (FSA) that their pay deals conform to the commitments.