British Prime Minister Gordon Brown, seeking to head off mounting public anger over bankers' bonuses, pledged on Monday to end rewards for failure in a financial system crippled by the credit crisis.
However, Brown stopped short of banning bonus payments in banks which have received state backing despite a senior figure in his ruling Labour Party said such rewards would be "economically and politically outrageous".
With Britain's economy in recession, there has been widespread criticism after reports that state-backed Royal Bank of Scotland may pay out 1.0 billion pounds ($1.5 billion) in bonuses, even though it has just posted the biggest-ever loss for a British company.
"We are leading the way … in sweeping aside the old short-term bonus culture of the past and replacing it first of all with a determination that there are no rewards for failure," Brown said in a speech in London.
Banks around the world have come under pressure to slash this year's bonuses. U.S. President Barack Obama described reported Wall Street bonuses of $18 billion as "shameful" and the "height of irresponsibility".
Banks in France and Switzerland were among the first to announce swingeing cuts to this year's bonus payments.
British bank Barclays Plc said bonus payments across the bank would almost halve for 2008 as it reported a 14 percent drop in profit on Monday.
One of Brown's senior ministers said bankers who lost money during the downturn and received state help have a "moral responsibility" to reject bonuses this year.
BONUS CAP
However, Treasury minister Yvette Cooper said it would be difficult to compel banks to scrap all bonuses because some staff have payments written into their contracts. It is too soon to follow the lead of United States and put a mandatory cap on bankers' pay in the future, she added.
"Even where there may be legal obligations, bonuses should be minimised this year," Cooper told BBC radio. "Senior executives themselves need to take responsibility and consider whether they should be taking bonuses."
Former Labour deputy prime minister John Prescott said the government should ban bonus payments within banks which received government capital in two rescue packages.
"This is morally and economically outrageous," Prescott said on the Facebook social networking site, where he launched a campaign to stop the bonuses. "This is raw capitalism and this country rejects it."
Conservative opposition leader David Cameron said bankers should "wake up and smell the coffee" and understand that some of them wouldn't have jobs without state help.
"It is insulting, it is shameful to then take taxpayers' money that's gone into the banks and use it for bonuses," he told a news conference.
The economic gloom has boosted Cameron's poll lead ahead of an election due by May 2010. An ICM survey in the Sunday Telegraph put the Conservatives up four points on 40 percent, ahead of Labour on 28 percent.
Finance minister Alistair Darling ordered a review into the banking sector's salaries and bonuses as part of a wider study of banks' corporate governance and risk management.
"It is clear that corporate governance should have been far more effective in holding bank executives to account," he said.
