Government consults on bank bonus transparency

The ABI has called for more money to go to shareholders

The UK government has launched a consultation on new rules that would force banks to declare more details of executive pay and bonuses.

Under the plans, the UK's 15 largest banks would publish the pay packages of their eight highest-paid executives whose bonuses are not declared.

The move would include staff at foreign-owned banks.

It would extend previous rules requiring disclosure of the highest-paid five executives.

"The banking system cannot reward employees for short-term performance while leaving investors exposed to long-term risk," said Mark Hoban, Financial Secretary to the Treasury.

The rules would cover all banks operating in the UK with assets above £15bn and would come into force in 2012, covering the 2011 financial year.

For UK banks, the rules would cover the eight highest-paid non-board executives, as board executives must already declare their remuneration.

However, banks would not be forced to disclose the names or titles of highly-paid individuals.

The rules would also not apply to traders making large one-off bonuses, instead covering executives with responsibility for managing risk.

Insurers call

The proposals come after of the UK's most influential shareholder groups, the Association of British Insurers (ABI), called for a "fundamental shift" in bank pay levels.

"We want shareholders to hold banks to account for their bonus structure," added Mr Broad.

A letter from the ABI's director general, Otto Thoresen, said the balance between employees and shareholders had become "inequitable".

It called on banks to ensure that executives were not rewarded when the share price fell.

And it said banks should build capital by cutting pay, not just dividends.

"It can no longer be business as usual for this remuneration round," said Mr Thoresen.

Limit discretion

His members "expect to see significantly lower bonus pools and individual awards given the current market circumstances".

The ABI said remuneration committees at banks should not use their discretion to discount factors outside of management's control when setting pay levels.

Instead, it argued, pay should mirror the impact of events on the shares held by insurance companies.

The group said that not only would pay restraint be in the interests of shareholders and of the company, but that it could also benefit employees holding share options.

That is because, it claimed, shares would go up in value if banks cut back on excessive pay.

'Tough action'

On Sunday, deputy Prime Minister Nick Clegg said the government was to publish new proposals to curb "unjustified and irresponsible" pay rewards in the private sector.

The deputy prime minister said ministers would announce plans to "get tough" on excessive boardroom pay in January and may legislate if necessary.

Among likely steps is widening the membership of remuneration committees, which set pay, to include workers.

Recent figures showed executive pay at the UK's top firms rose 50% last year.

Pay research firm Incomes Data Services said this increase took the average pay for a director of a FTSE 100 company to just short of £2.7m.