Joint call for bank bonus rules

The Group of 20 richest nations must adopt "binding rules" to regulate bank behaviour, the leaders of the UK, France and Germany have said.

UK Prime Minister Gordon Brown, French President Nicolas Sarkozy and German Chancellor Angela Merkel made the comments in a joint letter.

They also agreed to explore ways of limiting bonuses at banks to prevent future financial meltdowns.

The leaders also said banks could not go on as if the crisis never happened.

Finance ministers meet in London from Friday, ahead of the G20 meeting, in Pittsburgh later this month, with bonuses on the agenda.

UK Chancellor Alistair Darling told the CBI in Scotland, that bonuses were not a problem if they were "deserved for long term success or hard work" but added "a bonus shouldn't be guaranteed, it should be earned".

Alistair Darling: '' A bonus shouldn't be guaranteed, it should be earned"

He echoed the view that nations must work together, saying international co-operation was needed to "prevent banks playing one country off against another".

'Reprehensible'

In the letter, the three leaders say "speculative activities that constitute a risk to financial stability should also be discouraged by increasing capital requirements".

They also discussed bankers' pay, which has been the subject of much debate in the run-up to the G20.

"We should explore ways to limit total variable remuneration in a bank either to a certain proportion of total compensation or the bank's revenues and/or profits," they said.

"Our citizens are deeply shocked at the revival of reprehensible practices, despite taxpayers' money having been mobilised to support the financial sector at the height of the crisis," the letter said.

"The abatement of financial tensions has led some financial institutions to imagine they can return to the same modes of action prevalent before the crisis. This is not an option."

The statement is a sign of unity on bank bonuses, after mixed signals on the European Union's willingness to act on the issue.

'Partying like 1999'

France is proposing a series of mandatory caps on bonuses - which the head of the Eurogroup of eurozone finance ministers, Luxembourg's Jean-Claude Juncker, said he "totally supported".

The UK opposes curbs on bonuses, with Gordon Brown preferring payouts based on long-term success.

However, it has been acknowledged that the UK must be persuaded to give its support if French President Nicolas Sarkozy's desire to push through strong G20 regulation on the issue is to succeed in Pittsburgh.

UK Chancellor Alistair Darling told the Independent newspaper that the French plan to cap bonuses would be "unworkable".

But he saw "no problem" with the French plans to claw back bonuses after three or four years if they were not justified by performance.

In comments ahead of the finance ministers' meeting in London, Sweden's Anders Borg said it was "very important that we as politicians give a clear message that old bonuses must come to an end".