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Banker bonuses can be clawed back for up to 7 years, says BoE

The Bank of England had proposed in a consultation paper in March there could be clawback of bonuses up to six years from the date they were fully paid out but has now extended that timescale.

A painted sign for a public house named ‘The Banker’ in the City of London. — Reuters

Bankers who break rules on their conduct may have to hand back bonuses up to seven years after being awarded them, the Bank of England said on Wednesday as it unveiled some of the world’s toughest curbs on the sector.

The measures are the latest response to multi-billion pound taxpayer bailouts of lenders such as Royal Bank of Scotland and Lloyds in the financial crisis of 2008 and 2009, with few individual bankers subsequently punished for reckless behaviour.

Hefty bonuses still being paid to bankers at a time of belt-tightening for most people have also prompted public anger over the issue and lawmakers have responded with calls for curbs on the sector.

The Bank of England had proposed in a consultation paper in March there could be clawback of bonuses up to six years from the date they were fully paid out but has now extended that timescale.

Britain’s latest tightening of the screw on the financial industry also comes as bad behaviour is still being uncovered, with leading banks already fined for manipulating benchmark interest rates and braced for further possible fines after allegations of rigging foreign currency rates.

Earlier this week Lloyds was fined $370 million for rigging benchmark lending rates.

The new clawback rule will come into force next year and will apply to bonuses made on or after Jan. 1, the Bank said.

Bonuses are typically paid out over three to five years and can already be clawed back during this time, but the new rule goes further to allow the clawing back of an award after it has been received.