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Royal Bank of Scotland risked causing outrage today after it emerged the state-owned bank is paying high-flying staff as much as it did before the financial crisis struck in 2007.
The bank, 70%-owned by the taxpayer following a £20 billion Government bailout, has offered handsome salaries to recent recruits and handed pay rises to existing staff to stop them moving elsewhere.
The news of the lavish deals comes weeks after the bank was embroiled in a major political row over the £9.6 million pay deal for new chief executive Stephen Hester.
It will infuriate politicians, unions, customers and staff and comes as RBS slashes thousands of jobs around the country following its near-collapse last year.
RBS has filled about a dozen positions in its investment banking and markets operations by offering huge salaries, high commissions and pay guarantees for a number of years. Among those to benefit is Antonio Polverino, a top Merrill Lynch bond salesman recently poached by RBS. Kaushik Amin, who was hired to be chief executive of RBS's commodities trading joint venture with Sempra Energy, was also given a mega-deal.
To keep fixed-income staff, it is thought the bank has elevated pay packages to higher than those seen in 2007 by raising commissions.
RBS declined to comment on how many people it has hired this year or on the size of the pay packages. It said most of the recruits replaced departing staff. Spokesman Steven Blaney said RBS has offered just “a handful” of guarantees.
“We will continue to act commercially, which includes paying our people in line with global peers,” he said. “Anything else impacts our ability to attract and retain the staff we need to support our clients and create value for shareholders.”
The Government took a 70% stake in RBS by buying shares at an average of 50.5p each. Taxpayers were today sitting on a loss of nearly £5 billion on the £20 billion investment as shares traded up 0.15p at 38.4p.
The public is also out of pocket on its £15 billion investment in Lloyds Banking Group.
The Wall Street Journal today reported that RBS is not the only bank propped up by state to be offering huge rewards to lure stars and reverse last year's steep losses.
Bank of America recently hired a top bonds salesman with a guaranteed two-year deal valued at about $6 million for the first year, while Citigroup offered nearly $2 million in an attempt to recruit a top brokerage executive.
Mark Reilly, a Chicago-based compensation consultant, said: “The state is helping these banks stay in business...so they are essentially offering this compensation using state money.
“This has really been a surprise for other banks, who thought compensation was going to drop.”
Reader views (9)
Banking atracts the best and the brightest?, Alan of London, have you forgotten the tax payer has just bailed them out, otherwise they would and should have gone bust, I guess you work in banking?
- Paul, bolton, 16/07/2009 21:18
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RBS must remain competitive. End of Story. Live with it , banking is well paid that's why it attrachs the best and the brightest.
- Alan, Lon, 16/07/2009 17:40
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It ameks me sick to hear this - why doesnt the Govt put a stop to this? if these guys were so hot, wouldnt they have steered the banks away from the downturn prior to it all happening?
- Dick V D, London, England, 16/07/2009 15:25
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What do people want? RBS going under and the tax payer losing its full investment or to turn around and get back to profitability that the tax payer can get their investment back (maybe even making a profit out of it)? Surely it must be the latter!
It must be accepted that it costs money to recruit the best and brightest in the market, and that is in the best interest of the tax payer as well. I agree that some rewards were excessive, but it will be disastrous if RBS and Lloyds are forced to pay lower than market rates to its staff and all the best people making money for these banks leave to join Goldman's, etc where there would be no limit on what people get paid.
- W, London, 16/07/2009 15:08
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This is to be expected, you pay peanuts and you get monkeys. In order for this bank to get out of trouble and back to profitability you need to attract talented staff who expect a decent wage and a reward for returning the bank to profitability.
- Cm, London, 16/07/2009 13:43
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Leopards never change their spots?
- Mickinlondon, london., 16/07/2009 12:41
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one could understand these mega salaries if they were good at running banks, but we know that they are hopeless - their only talent is for lining their own pockets.
- V Thompson, folkestone uk, 16/07/2009 10:58
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Why be shocked.
The whole of the financial press and the political establishment cheered on the bailing out of bust banks.
You cannot guarantee their positions and expect restraint as well, it has to be imposed.
The banks should have been allowed to go bust and the government then stepped in and guaranteed the depositers.
Vic could then have picked up HBOS for a song and most of the employees would have had the opportunity to draw dole and rebuild their previously misguided lives.
- Alan, Llandrindod Wells, Wales, 16/07/2009 10:55
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Rediculus. Here is a bank receiving support from Tax Payers, and being funneled money at virtually zero cost by the central bank and yet, there they see no issue with paying out bonuses like these... where is the return to the public for the risk THEY are taking? Clearly the only change effected by the management shake-up was to replace fat-cats by even fatter fat-cats with better political connections. The secret handshake is still alive and well!
- Harvey, London, 16/07/2009 10:54
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