RBS admits pay "way too high" but says it must pay bonuses

12 February 2009 / by Rachel Mason
Stephen Hester, the chief executive of RBS yesterday admitted to MPs at the Treasury Select Committee that pay in some areas of the banking industry are "way too high," but controversially confirmed that bonuses would still be paid.

Mr Hester said he planned to take a major role in ensuring that bankers' pay comes down, but defended RBS' decision to pay bonuses to staff despite public outcry that it is inappropriate given that the taxpayer has bailed the bank out to the tune of £20billion.

He told MPs, "I sympathise 100 per cent with the public mood and if I thought it was a responsible move, I would not pay a penny,", but said that the majority of RBS' employees – around 176,500 of 177,000 staff - did what they were asked to last year and made profits.

He said that those 500 staff that did lose the bank money would not get a bonus, but that others must be paid in order for RBS to retain and attract the best staff.

"I need to engage our staff, to have the best people stay with us, and attract better people to replace the people who made a loss," said Mr Hester.

Also at the hearing were Eric Daniels, chief executive of Lloyds Banking Group , Abbey Bank's Antonio Horta-Osorio, Barclays chief John Varley and Paul Thurston, UK managing director of .

Although talk of bank bonuses is a hot topic for the whole
banking industry, the Treasury Select Committee were understandably more interested in those banks that have had to take public money.

Chairman of the committee, Rt Hon John McFall asked each of the banks' representatives to confirm how much public money they have so far needed to take; Barclays, HSBC and Abbey all confirmed that they have taken no UK taxpayer money, while Mr Daniels admitted to £13billion in equity and £4billion in preference shares. He also said that were it not for the fact that Lloyds TSB recently took on HBOS, it would not have had to turn to the Government for a £17billion bail-out.

Mr Hester was forced to admit that RBS has taken £15billion in equity and £5billion in preference shares, and when asked who would be making a decision about bonuses, given that the UK taxpayer has a 58 per cent share in RBS, he said technically, the decision would still lie with the RBS board.

© Fair Investment Company Ltd