Outrage as RBS boss Stephen Hester gets £9.6m pay deal

Royal Bank of Scotland, which is 70%-owned by the taxpayer after its multi-billion-pound Government rescue, approved a £9.6 million pay package for new chief executive Stephen Hester.

And City staff at Goldman Sachs, including its co-chief executives Michael Sherwood and Richard Gnodde as well as Yoel Zaoui, head of investment banking in Europe, have their eyes on record bonuses this year as the banking giant pulls in huge revenues and profits.

Rival bankers at firms such as Barclays Capital, Credit Suisse, Deutsche Bank, JPMorgan and Morgan Stanley are also hoping for lavish rewards.

The prospect of a return of the mega-bonus, so soon after meltdown in the financial system plunged the global economy into its worst recession since the Second World War, has sparked outrage.

It also makes a mockery of pledges by Gordon Brown to eradicate the culture of greed in the City, which many critics say fuelled the crisis.

Vince Cable, Liberal Democrat Treasury spokesman, said: "The investment banks more than any other institutions created the culture of excessive leverage, excessive risk and excessive bonuses that led to the downfall of the financial system.

"Now they are cashing in and the same bonus culture has returned. The result must be that we are being pushed to the edge of another crash," he added.

Hester's pay at RBS, which will be unveiled this week, is made up of £1.2 million in basic salary, a £2 million non-cash bonus, and nearly £6.4 million of long-term share and stock options.

It was approved by shareholders including UK Financial Investments, which looks after the Government's 70% stake, just a day after Hester's disgraced predecessor Sir Fred Goodwin agreed to give up a third of his £16.6 million pension deal.

However, Hester will only receive the maximum payout if the RBS share price rises above 70p.

The shares were up 0.755p to 37.955p today, still some way off the 50p at which the Government bought its stake with taxpayers' money.

His pay could be dwarfed by top bankers at Goldman's London headquarters on Fleet Street, including Sherwood, Gnodde and Zaoui.

The Wall Street bank enjoyed a spectacular first quarter of the year as a lack of competition and surge in fixed income revenues sent profits soaring by 20% to $1.8 billion (£1.09 billion).

Analysts expect it to report a similarly strong second quarter next month and if, as expected, it translates into record profits for the year, Goldman's 28,000 staff including more than 5000 in London will get record bonuses.

David Williams of Fox Pitt Kelton said: "This year is shaping up to be the best year ever for investment banks, or at least those that have emerged relatively unscathed from the credit crisis.

"These banks are intermediaries in the bond markets where governments and companies are raising billions of pounds of new money.

"There is also a lack of competition that means they can charge huge sums for doing business."

Goldman is one of 10 American banks to have repaid bailout money which they received from the US Treasury under the Troubled Asset Relief Programme set up after the collapse of Lehman Brothers - freeing it from government constraints on pay and bonuses.