Banker Bonus Clawback Rules To Be Tightened

The measures would toughen policies that have already been brought in following public anger over the financial crisis, which allow for bonuses to be cut, stopped or clawed back.

Regulators say they want to go further and crack down on so-called "rolling bad apples" – bankers who pocket a bonus and then join another lender before any reckless behaviour is uncovered.

Andrew Bailey, deputy governor of the Bank of England and head of the Bank's Prudential Regulation Authority, said: "Individuals should be held accountable for their actions and not be able to actively evade the consequences of their actions.

"Today's proposals seek to ensure that individuals are not rewarded for bad practice or wrongdoing and should help to encourage a culture within firms where reward better reflects the risks being taken."

The proposed new rules target buy-outs – when a bank compensates new employees for unpaid bonuses that were cancelled when they left their old bank.

Regulators say these undermine the ability of the original employer to claw back a bonus which has been paid, or withhold or cut the unpaid portion of a bonus, should misconduct be discovered later.

The new proposals say an employee's new contract would allow for a bonus to be recovered or not paid should the person's former employer determine guilt in misconduct or risk management failings.

But they would also allow the new employer to apply for a waiver if they believe the determination of guilt by the old firm was "manifestly unfair or unreasonable".

Alexandra Beidas, an employment lawyer at Linklaters, said the proposals – which are subject to consultation – would make it impossible for a banker to wipe the slate clean by changing jobs.

But she added: "It remains to be seen if this will be workable in practice as it will involve sharing potentially sensitive information between banks."

Last year, the BoE said it would stop short of actually banning buy-outs for fear this would lead to a competitive disadvantage for British firms given there is no similar rule in other financial centres around the world.