Bonus clampdown for City workers

MORE than 5,000 City bankers earning more than £1 million a year look set to be hit by an additional bonus clampdown by the UK's financial regulator, writes Martin Flanagan.

Shortly after the banks revealed their bonus plans to the Financial Services Authority last November, the UK government unveiled a 50 per cent tax on all bankers' bonuses over 25,000.

But it is understood the FSA has now told the banks all City workers picking up seven-figure sums will be affected.

Under the proposals, any employee of a UK bank who earns at least 1m will be forced to defer 60 per cent of their bonus for three years.

Many banks had believed the crackdown would only apply to "significant persons" in a bank – not including the likes of traders – earning more than 500,000.

But senior banking sources told The Scotsman yesterday they believed the FSA had increasingly flagged that the crackdown would have a wider application.

It comes amid public anger that it seems most banks are taking the 50 per cent tax "hit" on bonuses over 25,000 in order to retain staff despite the industry helping tumble the world economy into recession.

American investment banking giant JP Morgan is expected to announce a $29 billion (18bn) bonus pot when it announces its annual profits on Friday.

• Walton & Co, the bank being launched by City analyst Sandy Chen, yesterday denied reports that institutional pressure had forced former Bank of Scotland chief Sir Peter Burt to withdraw from the project.

It comes as Chen begins a road-show for the new bank this week, which hopes to raise 200m.

A Walton & Co spokesman said: "It is categorically incorrect that Sir Peter was forced out of this venture by the institutions."