LONDON: British prime minister Gordon Brown joined his German and French counterparts today in calling for G20 leaders to impose tough global rules on bank bonuses.

Brown delayed joining the Franco-German plan for three days this week until a proposal for an absolute cap on individual traders’ bonuses linked to company profits or revenue was watered down.

Brown sought the concessions before agreeing to sign a letter drafted by German chancellor Angela Merkel and French president Nicolas Sarkozy, and eventually published yesterday. It had been due to be published on Monday. Brown, determined to protect the interests of the City of London, insisted that the French plan for a bonus cap should only be examined, rather than endorsed, leaving a Labour prime minister taking a less radical stance than the two conservative European leaders. Britain regards bonus caps linked to annual profits as impractical, but Downing Street insists it is nevertheless backing unprecedented tough action in the face of evidence that banks are reverting to past excesses.

The letter, designed as a common European Union negotiating position before the G20 summit in Pittsburgh this month, has been published ahead of a two-day meeting of G20 finance ministers in London today. The meeting aims to rebuild momentum before the summit amid fears that the political will to combat the recession and bankers’ excesses is ebbing away.

The letter proposes internationally binding rules that will tightly link City bonuses to performance and allow for a clawback if a firm subsequently underperforms. The rules, some already adopted by the Financial Services

Authority, would be policed nationally, the letter proposes, but any large bank recognised as failing to apply the

rules would face sanctions and might lose its mandate

to trade.

The letter proposes risky speculation should be curtailed by increasing all banks’ capital requirements, something the G20 proposed in April, but on which there has been little progress. A deadline of next March is proposed for abolition of tax havens.

In the most contentious section, the leaders of the three largest European economies propose to “explore ways to limit total variable remuneration in a bank either to a proportion of total compensation or the banks’s revenues/profits”. Sarkozy touted his diplomatic success in persuading Brown to sign up to the initiative. He said: “The letter that I am sending this afternoon about bonuses will have a little surprise in it. It will be signed by Mrs Merkel and myself; it will also be signed by Gordon Brown. Even the English understand that we have to regulate, we have to limit, and that there are unacceptable scandals.”

The letter claims Europe’s people are “deeply shocked at the revival of reprehensible practices”, despite taxpayers’ money being mobilised to support the financial sector.

The UK treasury wants bonuses to be paid over five years with some of the money clawed back if there is a weakening in the bank’s subsequent performance. It also proposes that much of the bonus will come in non-cash payments such as stocks.

The G20 meeting this weekend will discuss when and how to exit from the current round of fiscal stimulus.