Steady on

16 November 2009 By George Hay Follow @gfhay

The government plans to introduce legislation allowing the regulator to rip up employment contracts if they encourage excessive risk or involve multiyear guarantees. Bankers haven t earned themselves any friends. But meddling with their contracts is a worrying way to go.

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The Financial Services Authority is likely to be given enhanced powers to curb bonuses that are based on excessively risky business, under plans to be outlined his week by the UK government.

Wednesday's Financial Services Bill is expected to give the UK regulator the ability to tear up contracts that it believes encourage inappropriate risktaking.

One of the main targets will be to prevent banks paying guaranteed bonuses over several years.

The legislation is not expected to apply to bonuses paid this year, which are now being worked out and are expected to reach £6bn, according to the Centre for Economics and Business Research. It is also not expected to apply to existing contracts.

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