Earlier today, the government unveiled Project Merlin, its attempt to link executive pay
in banks to institutional lending, whilst driving down bonuses and increasing the Treasury’s revenue take. Here are its key components:
Osborne welcomed ‘the most transparent pay regime in the world. Executive pay will be linked to targets for gross lending; remuneration for the top ten highest paid staff in each financial institution will be subject to the approval their board’s remuneration committee; in 2012, all large banks will have to publish payment details for members of their board and the 8 most high paid staff members.
He then promised a new deal for small business lending. There is an agreement that institutions will lend an extra £10bn to small and medium sized enterprises, a rise of 15 percent; gross business lending, against which executive pay will be linked, will rise to £190bn in total, from £179bn currently. The four major banks have agreed to lend an extra £1bn to the regional growth fund and £200m to the Big Society bank, in an effort to stimulate growth.
Today’s announcement coincides with yesterday’s bank levy arrangement, which will raise more than £10bn over the course of this parliament.
In response to the government, both Andrew Tyrie and Ed Balls raised concerned over the issue of transparency and enforcement, especially in those institutions in which the taxpayer is the majority shareholder. And, as the debate unfolds, details of RBS’ and Lloyds’ latest bonus round are emerging to the irritation of all except the beneficiaries.
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