Chancellor tells banks to cut big bonuses and store money for winter

CHANCELLOR George Osborne warned banks they should not give massive rewards to their executives this year, and instead store money for the winter, as the government unveiled a consultation on plans to lift the lid on the bonus culture.

The shot across the bows from Mr Osborne came weeks after the Governor of the Bank of England, Sir Mervyn King, told banks that large bonuses would be bad for the economy.

The government’s proposals on bonuses would force banks and other large companies to publish the details of large bonus payments to senior executives.

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The Chancellor made his comments during Treasury questions as he urged bank bosses to plan ahead amid the eurozone crisis.

He said: “What we have got to do is make sure our banks are prepared for whatever is thrown at them in the coming months, not that they pay out these large bonuses that used to be paid out.”

Treasury select committee chairman, Tory MP Andrew Tyrie, said Sir Mervyn had called on banks to cut bonuses and shareholder dividends so they could boost funds and lend to small businesses.

Ministers have urged institutions to lend money to firms, but bosses insist they need to build balance sheets by retaining spare cash.

Speaking at Treasury questions in the Commons, Mr Osborne said: “We need stronger banks not larger bonuses this winter.”

He added: “The advice from the Bank of England is very clear, and I would expect the banking system to follow that advice.”