Darling announces Treasury inquiry into banks and bonuses

Sunday, 8 February 2009 12:00 AM

The chancellor has announced an independent inquiry into bank management and executive bonuses.

Writing in the Sunday Telegraph, Alistair Darling defended the government's action to assist the banking industry and insisted that banks would need to operate more responsibly in the future.

The review will put forward recommendations about the risk management practices of banks as well as whether pay structures within banks incentivises the taking of risks.

He wrote: "It [The inquiry] will also look at how boards operate, at the balance of skills, the role of institutional investors and whether our approach is consistent with international best practice.

"Of course, no government should try to remove risk-taking from the system. Nor would we want to.

"But a government can act to protect people when excessive risk-taking threatens us all," Mr Darling stated.

He also emphasised that those who took excessive risks would not be rewarded for their failure and that governments, regulators and banks would have to learn lessons from the prevailing crisis.

The announcement comes amid reports that banks who received assistance from the taxpayer were planning to pay bonuses to their staff.

Yesterday, Commons leader Harriet Harman also announced an inquiry into whether bonuses in the city discriminated against women.

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