British Chancellor set to outlaw City bonuses for failure

The British Chancellor Alistair Darling has signalled he is ready to legislate to curb huge market bonuses amid growing public fury over “rewards for failure”.

Mr Darling insisted it was unacceptable for traders to get massive payouts when they were putting economic stability at risk.

His comments, in an interview with The Sunday Times, came amid evidence that the British bonus culture was already returning – less than a year after the near-collapse of the international financial system.

It was reported tonight that the investment banking arm of Barclays, BarCap, has tried to poach a team of five commodities traders by offering them a package worth up to £30m (€35m) in salary and bonuses.

Barclays has made use of Bank of England funding and UK Treasury guarantees during the crisis.

Mr Darling said: “If we need to change the law and toughen things up, we can do that. I’m quite clear that some of the problems we have today were caused by the fact that some traders were incentivised to take risks which neither they nor their bosses fully understood.”

The new rules would cover the whole British banking system rather than just those institutions which have been part-nationalised, such as the Royal Bank of Scotland (RBS) and Lloyds.

The announcement follows an outcry about the failure of the Financial Services Authority (FSA) to take a tougher stance on City bonuses.

The watchdog has declined to order banks to base bonuses on overall company performance, instead only issuing “guidance”.