Prime Minister's question asked in the House of Commons, by Lord Cameron of Chipping Norton (Conservative). It was answered on Wednesday, 8 October 2008 on behalf of the Prime Minister.

Engagements

Question: Taxpayers are making an enormous investment and potentially have a huge liability. They want their interests to be protected. That should mean no more irresponsible behaviour, no more inappropriate dividend policies and no more indefensible bonus packages. Will the Prime Minister confirm that those will be conditions of the agreement for getting taxpayers' cash? Crucially, how will the conditions be enforced once everyone has signed up?

Answer: Again, I am grateful for the chance to explain how we will move forward the proposal that the Chancellor announced this morning. On the remuneration packages available to executives, it will be a condition of the capitalisation of banks that they accept new conditions attached to executive remuneration. We are in discussion, on a case-by-case basis, with the banks that want to take up the scheme about the level of executive remuneration, especially the bonus system that has caused so much difficulty. Our aim is to support and reward work, enterprise and responsible risk-taking, but not irresponsible and excessive risk-taking, which has caused so much damage. The Financial Services Authority—[Interruption.] I was asked a question, so I think I should have the chance to answer. The Financial Services Authority will soon publish a consultative document about the danger to company balance sheets if, by excessive risk-taking, some of their executives put those balance sheets and companies at risk. That will form part of its estimate of what capital those companies need. It is not only a question of the individual banks with which we are dealing having to accept new conditions—there are strings attached and conditions must be met—but throughout the system, the FSA will propose a new way of dealing with executive remuneration, especially bonuses, which will allow it to regulate according to the capital requirements of a company that takes excessive risk.

Secondary information