BOE targets bankers' bonuses with seven-year clawback rule

Senior bankers could be forced to pay back bonuses as long as seven years after they are awarded under new Bank of England rules to curb short-term risk-taking.

Banks operating in Britain should amend employee contracts so they can recoup bonus payments from workers who exceed their risk limits or break financial-conduct rules, the Bank of England said.

"As these new rules are among the toughest in world, we need to be careful we don't create uncertainty which might make it increasingly hard to attract talent to London," said John Cridland, director general of the Confederation of British Industry, which represents the business sector.

The rules, which come into force on January 1 next year, are part of a move by global regulators to hit bankers' wallets if their risk-taking leads to large losses. While work at the international level has focused on so-called clawback powers to recover bonuses, and on deferral rules that limit immediate payouts, the European Union has also adopted a ban on awards worth more than twice fixed pay.

The British measures go beyond minimum EU standards, which require at least half of bonuses to be in shares or similar instruments and payment of at least 40 per cent of awards to be deferred for at least three years.