by Stephen Tall on February 25, 2010
Bonuses for bankers: can they be justified? That’s the question everyone’s asking following RBS’s announcement that it made eye-watering losses of £3.6bn, but paid out bonues to staff worth £1.3bn.
Lib Dem deputy leader Vince Cable is dubious:
It’s hard to understand why £1.3bn is being paid out in bonuses when RBS continues to make losses. RBS rewarding individual bankers is like a football team paying their striker for scoring when they’ve just been relegated.
“While it is good news that RBS is meeting its mortgage lending target, its lending to business has fallen. The Government has to get a grip and explain how it will exercise its 84% shareholding in RBS to benefit the taxpayer. At present we are seeing very little. Part nationalised banks are for lending, not bonuses.
“Stephen Hester seems to think that his only goal is to push up the share price. But RBS has made a commitment to support recovery by ensuring that viable businesses are not starved of capital. If RBS doesn’t lend to businesses they will go bust and people will lose their jobs. The lending agreements for 2011 need to be more concrete, long term and better policed.”
But is Vince being wholly reasonable? After all, the bonuses being paid are being paid in stock, and though some shares can be cashed in as early as June, other staff will have to hold on for at least five years.
Moreover, as Philip Hampton, RBS chairman, pointed out, the bank is facing “uncomfortable amounts of staff (leaving), but I hope we have done enough to help ensure it is damaging but not destructive”. Do we really want an exodus of the top banking talent from the banks in which we, the taxpayer, have a stake to those banks which are not part-owned by the state?