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The banking industry today faced a fresh wave of public anger as high-flyers in London looked set for bumper bonus payouts despite the financial crisis and global recession.
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.
Reader views (22)
You people do understand there is competition for people like this right? Sort of like good actors and sportsmen command high wages? Its called having a valuable skill set. The 70% ownership is not a gift, it's an investment, be happy you have an experienced banker with his compensation tied to performance running the show.
- Brian, London
Ha ha - i thought these people being paid millions were intelligent. Poor people they want all the money for themselves and haven't learnt any lessons! ha ha what idiots, they'll ruin it for all of us again. Oh well atleast they'll be ok. But people don't forget, they really do deserve all this money - they are the go getters of our time, they work harder than the rest of society...don't be too harsh on them. Remember they are intelligent.
- William Bailey, wgtn
As the old saying goes,"The best way to rob a bank is to become a part owner." The sitation will never change under the present system,it is time for a change.
- Ronald Whitten, Chesterfield Derbyshire
Shocking £9.6 Million ..480 times more than the average UK wage and 900 times more than someone stacking shelves in Tesco.
- Watt, Aberdeen
i would think that a salary of £1.2 million would be sufficient with a bonus of say that again if he acheives the 70p a share price. If the rest want to poach him so be it. Somehow common sense has to break out eventually.
- Ayliff Alexander Mcnab, Orihuela Costa
This stinks to high heaven, once more the rich get richer at the expense of us peasants, we lose our pensions they get bigger ones we lose our jobs they get big payouts, all done at our expense. Can we please all know what he will get paid as and when the bank gets itself into another crisis and what his severance terms are?
I wonder if there are still old fashioned lamp posts in london, maybe it will do him good to look at them now and then.
- Paul Foster, Runcorn, UK
Adam mya have a point about whether the return rate is high enough but regulation is nothing to do with individual bank bosses. And you don't say what is the right salary fro eomeone who could work somewhere else. Plus, those firms that either didn't take (or weren't forced to take) public money - like Barclays & Goldman can do whatever their shareholders want. And Scotty, have you never noticed that Generals, Police, Law Lords and others get more than the PM?
- Peter Bench, London
I SAID IT BEFORE SO I'LL SAY IT AGAIN, WHAT ABOUT A MINIMUM MAXIMUM WAGE?
IF SUCH A THING EXISTED WHERE WOULD READERS OUT THE MAXIMUM? GIVEN THAT EVERYONE ULTIMATELY GETS PROMOTED BEYOND THEIR ABILITY?
- Alan Green, Woodford Green
Vince Cabel totally misses the point.
large salaries and bonuses in investment banking is not the issue. As long as the bank is regulated to ensure that it cannot get into the exposure risks that caused the issues before.
as for RBS, his bonus is tied to share price performance, which to the public is a positive, we clearly need RBS to be successful with an aim of moving out of public ownership eventually..
- Martin_Clerkenwell, london
Hester is little more than a state employee. Why, therefore, is he entitled to a salary about six times greater than that of the Prime Minister.
- Scotty, Cambridge UK
I have nothing against people being incentivised and well-rewarded if they have earned it. But this is RBS we are talking about, a 70% nationalised company. What does the Government (UK Financial Investments) think it's doing voting in favour of this?! Any bonus should be conditional on (i) a much more significant return to the taxpayer of the bail-out investment that was made, and (ii) improved regulation.
- Adam, London, UK
I thought Gordon Brown told us that he'd "personally" ensured that this kind of abuse wouldn't happen again. Must have been mistaken - AGAIN!!!
- Malcolm, London
Dismal. Yet another case which illustrates that absolutely nothing has changed despite all the events of the past few months. This end-of-the-road Government are clearly powerless (or unwilling) to actually achieve resolution of major issues, preferring to spend their time (which we heavily pay for) fiddling while UK plc burns, and sinks into the sea.
- Andy Elephant & Castle, London UK
"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."
So why did 70% of taxpayers NOT get asked about this?
- Dom, London
so thats where the 31% APR I was charged on a RBS car loan goes. Well enjoy you hard earnings, whats 70% of 9.6 million?, thats how much he needs to pay the taxpayers back....
- Dc, Ealing, London
Thats it keep on paying these scum what ever they want and expect us taxpayers to foot the bill each time.
- Mike, London England
Incredulous-AGOS, Stephen Hester is worth 300 x as much as you. Get over it.
- Bloke, London
The "financial crisis" is not an accident, and the capitalist system has been superseded by corporatism, whereby massive corporations control the government and, in turn, control us. The "crisis" was manufactured for the express purpose of transferring massive tranches of money from the poor to the rich. We have, in short, been robbed blind. As a taxpayer, I am not sure I can afford to pay £9m to one person; nor does he deserve it.
- Neil, London, London UK
Spot on DC London.
- Dave Davies, Basingstoke, Hants
This news should come as no surprise,have any reader tried to get a pig away from a trough.
- Richard, Streatham
Seems fair enough.....if the talent of these guys and girls has made large profits for their employer then they deserve their bonuses.
I would be very surpirised if any of the staff involved in huge mistakes over pricing risk over the past 6 years will still have jobs let alone bonuses...but this won't stop misinformed anti-capitalists' pelting this message board with half-baked notions of 'fairness' or 'justice'. Just remember, this country's tax coffers badly needs a successful financial services industry and of all the people working in the banking industry....it was a very small minority who were reckless. The vast majority generated profits for their employers and deserve the rewards they get. If you think that's unfair then do a bit of grafting and get yourself a job with them too.
One downside of the past 18 months upheaval not yet being reported is the lack of competition on the High Street for financial products and mortgages...it augers badly for us consumers looking for a competitive deal..not good news.
- Dc, London
I work my socks off for my profession and earn £32k pa. All employees got a letter last week saying that we won't get ANY cost of living/incremental rises this year, due to economic downturn. Friends across the occupational sectors are getting similar letters. None of us even dare take a day off sick at the moment. We are struggling to survive with seemingly daily increases in the cost-of-living.
If these bankers persist in thinking they are a separate entity to the rest of us, then society must expect trouble in the form of unrest...
- Incredulous-At-Greed-Of-Some, Essex
