Lord Turner, chairman of the Financial Services Authority (FSA), has given Britain’s banks until the end of the week to justify bumper bonus payouts.

Banks must provide a detailed breakdown of how bonuses will be split between cash, shares and other forms of payment.

Any bank that does not comply could be barred from paying bonuses, and told to use the money to build up reserves, Turner said.

“The major trading banks we know are making large profits for exceptional post-crisis reasons . . . we believe we are in a position to achieve capital enhancement without adverse consequences,” Turner said. “The priority use of these large trading profits must be to build up capital levels.”

The FSA’s move comes amid mounting expectations that HM Revenue & Customs will close loopholes that would allow bankers and business owners to avoid paying the 50% income-tax rate that comes into force next April. The new anti-avoidance legislation is expected to feature prominently in the pre-budget report (PBR) next month.

Clive Fathers at Grant Thornton said: “There are some aggressive schemes and a lot of them are unlikely to survive the PBR.”

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