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UK Labour Party Ratchets Up Anti-Bank Rhetoric
Feb. 12, 2015 7:01 p.m. ET
The U.K.’s opposition Labour Party ratcheted up its anti-bank rhetoric Friday, pledging to further clamp down on bonuses if it is voted into power this year.
As part of a suite of proposals, Labour said it would ensure bonuses could be canceled up to a decade after they are handed out if bankers misbehave. The party also said it would require banks to publish the number of employees earning more than £1 million ($ 1.5 million) and would declare a one-off levy on bonuses to subsidize an employment program aimed at young people.
The plan, which comes ahead of the U.K. elections in May, is the latest attempt by the Labour Party to play on the banks’ lingering unpopularity with the British public, particularly following recent allegations that HSBC Holdings PLC’s Swiss unit helped U.K residents avoid tax.
“We will ensure people involved in misbehaviour and misconduct would have to give back their bonuses for at least a decade after they have been paid out,” said Labour Shadow Chancellor Ed Balls in a statement. “As we have seen in recent days, wrong doing can take years to uncover.”
Currently bank executives and traders can be forced to hand back bonuses up to seven years after they are received if it is found that they contributed to a failure in risk management.
In the run up to the election, Labour has worked hard to distance itself from the free-market policies its leaders espoused before the financial crisis.
Last year, Labour leader Ed Miliband said he wanted to cap U.K. banks’ market share to force greater competition among British banks and to boost lending. A British competition watchdog subsequently started a probe into the U.K. banking market and is expected to publish its findings after the election. Labour said Friday it favors “a market-share test to ensure the market stays competitive for the long term.” The party reiterated its call for the creation of two new banks. This could be bad news for Lloyds Banking Group PLC, the U.K.’s largest retail bank by market share, analysts say.
The Conservatives dismissed Labour’s plans and said the Bank of England is already consulting on extending the clawback period for bonuses. “Since 2010 we have been clearing up the mess left by Ed Balls and Ed Miliband,” the spokesman said in a statement.
Come the election, analysts say U.K. banking investors face an unenviable choice: see Labour in power and banks potentially broken up, or see a Conservative-led government which could hold a referendum on whether the U.K. should stay in the European Union. “The 7 May General Election could potentially be a lose-lose event for U.K. banks,” Citigroup analysts wrote in a note earlier this month.
A stream of bank scandals aren’t helping. Recently files were leaked detailing how HSBC’s Swiss unit allegedly sheltered secret accounts for clients. Franco Morra, chief executive of HSBC’s Swiss bank, said on Monday that the unit “began a radical transformation in 2008 to prevent its services from being used to evade taxes or launder money.”
The bank’s chairman, Douglas Flint, is due to appear before a parliamentary commission later this month.
