UK’s Brown Warns Banks of Compensation Claims

April 23, 2010

British Prime Minister Gordon Brown said any bank found guilty of wrongdoing could have to pay millions of dollars in compensation.

Britain this week launched a probe into alleged fraud by Goldman Sachs after the United States accused Wall Street’s most powerful investment bank of duping clients.

“If what happened at Goldman Sachs and in any other bank is proven to be wrong, then hundreds of millions of dollars in compensation should be paid to British banks, and because we are the biggest shareholder in many of them, to the British taxpayer,” Brown said on Friday in a campaign speech for the May 6 election.

Brown also confirmed Labour plans, if reelected, to put what he called a “triple lock” on banks’ misbehaviour.

Giving details of plans to curb banking excesses, Brown said shareholders would be given new powers to have a say on the pay of their executives before the rewards were given.

The Financial Services Authority regulator would set their capital requirements for banks to prevent risky and irresponsible behaviour and could also void and change pay contracts if they were judged excessive.

Goldman was hit last Friday with a U.S. Securities and Exchange Commission civil fraud lawsuit.

Britain has an 83 percent stake in Royal Bank of Scotland and owns a large stake in Lloyds Banking Group after spending billions of pounds rescuing them at the height of the global financial crisis.

Goldman was charged with fraud by the U.S. Securities and Exchange Commission (SEC) over its marketing of a subprime mortgage product. Goldman has called the U.S. lawsuit “completely unfounded” and has vowed to defend itself.

According to the SEC complaint, Royal Bank of Scotland paid Goldman $840 million in August 2008 to unwind a position built up by ABN AMRO, some of whose operations RBS had acquired.

Brown’s Labour Party, in power for 13 years, is trailing in opinion polls but could remain in office if the election produces a hung parliament in which no party wins an overall majority.

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