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Bailed-out bankers facing curbs on fat cat bonuses
Joe Murphy5 Feb 2009
Failing banks were today threatened with pay curbs if they award “exorbitant” bonuses and salaries.
Downing Street made clear that Gordon Brown would be furious if bankers rescued with billions of pounds of taxpayers' money sought to pocket over-generous rewards.
The issue flared up after reports the Royal Bank of Scotland — now 68 per cent owned by the state after a £20 billion bail-out — was planning to give six-figure bonuses to traders whose deals exposed the bank to trouble. That was denied by the company, which said no decisions had yet been taken.
But Lord Mandelson, the Business Secretary, warned: “The banks have got to be sensitive to public opinion.”
No 10 pointed out that as majority shareholder in RBS, the Treasury-run UK Financial Investments could refuse to support payments.
“Any proposal would only be supported if it is consistent with the taxpayers' interest,” said the Prime Minister's spokesman.
Downing Street also voiced strong support for US President Barack Obama's plans, announced today, for a £346,000 cap on the pay of American bank executives forced to seek bail-out money from taxpayers.
“We have already set out our views on executive pay and we strongly agree with President Obama that we need a new approach to rewards for senior executives,” the spokesman said. The Government's approach went much further than its previous decision to veto bonuses to main RBS board members as a condition of the bail-out.
Senior officials said the Treasury will put strong pressure on all banks seeking help from its latest rescue package to rein in remuneration.
And a close ally of Mr Brown warned that “public anger” over fat-cat payments could trigger similar curbs to those imposed by President Obama.
“I think the Obama comments are feeding into the public anger at the situation and indicate change,” John McFall, the chairman of the Treasury select committee told the Standard.
Mr McFall added: “It is the traders and the deal-makers at RBS who got the bank into trouble. If there are big bonuses for them I think there will be a huge outrage.”
Chancellor Alistair Darling will not order a ban on bonuses, sources indicated, as many City employees are contractually entitled to them.
However, the asset protection scheme recently announced by the Chancellor contained a clause allowing the Treasury to impose conditions on banks seeking the new form of aid. Levels of remuneration to executives and bonuses are one of the areas where conditions can be imposed.
“We will look at the issue of remuneration in the context of these negotiations,” said the source. “We have a number of objectives, the principal one being to restart lending. Clearly, there are also these concerns about pay.
“I think if people see the Government providing significant support to these institutions they do not think it is right if people are extracting over-large salaries or bonuses.”
Stephen Hester, the new chief executive at RBS, is reported to be acutely aware of the sensitivity of the issue and may order most or all of the bonuses to be paid in shares.
Under the Obama plan, shares could be given out but the recipient could only cash them in after money borrowed from the taxpayer is repaid.
Like most banks, RBS is bound by contracts to pay a number of staff bonuses. The bank's remuneration committee will also consider whether payments are needed to retain staff.
Reader views (30)
Bankers' contracts would be totally invalid if their banks had gone bust. Like many in private sector who had contracts from their employers and have hitherto gone bust it goes without saying their contracts couldn't be honoured. The only area where work contracts are secure are the public sector, (and the banks since the tax payer inter alia have bailed them out). The Government needs to wise up and take a stance against throwing money around carte blanche in these areas. The money source is going to dry up soon and we, the small business, in the private sector, will all be on Job Seekers Allowance soon. They must stop this crazy overspending to keep the public sector and banks in business. Slash both areas and get value for money, I couldn't run a business with a bunch of quangos bleeding me dry.
- Lynda Maguire, Edinburgh, 09/02/2009 23:10
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I think the banks should not have any bonuses,as they would not have any money if it was not for the TAX PAYERS MONEY to bail them out.What if we did not put money in the banks they would have had to tighten there belts like everybody else is having to do in this ecenomic climate and not thinking about a nice FAT BONUS as they are now,and how they can spend our money.As the country is in a state after the banks ,we should be looking after the people ,not the people who have put us in this state.
- J Goddard, Gloucestershire, 08/02/2009 14:32
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Surely the contracts should be - no profit no bonuses.Otherwise government should impose 90% tax on bonuses if given. That should teach them.
- Edwin Abreo, London, UK, 08/02/2009 08:49
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If I made such losses as these people, for the company which employs me, I would receive my P45 and my bonus would be £56 a week unemployment payment
- Keith, South Shields, 06/02/2009 17:20
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$500,000 is way to much for losing money, we don't get bailed out of gambling debt, just told not to gamble, or gamble less. NO bonuses, no pay increase, no perks, till all is back on track. This should be the adittude, not bonuses.
- Donald Filak, Bisbee,Az, USA, 06/02/2009 12:38
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That this man has a job at all is beyond all belief. That he or anyone else in this most incompetent of governments lectures others on pay and privileges is just abhorrent.
- Da, london, 06/02/2009 12:32
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Incredible, the incompetence and greed of these people destabilises the very system that provides the rest of us with employment, warmth, security and a home, and then they leave us to pick up the pieces... and we’re still considering whether they should be rewarded… well the rest of use face years of tax increases to clean up their mess…. I’ve always been a free market libertarian but I can now see that the whole system is corrupt to the core.
- Nj, London, 06/02/2009 12:26
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The banking whizz kids and their managers who have created and encouraged those complex financial structures that led to the losses at no costs to themselves seem to have covered their futures very nicely.
For it's probably only they who have the detailed understanding of how to sort out the colossal mess of their own making.
Any government's dilemma now is that it has not only had to use taxpayers money to re-finance banks, but will probably have to pay the same people who caused the catastrophe big money to try and sort it out!
Feels a bit like being caught by the wheel-clamping industry.
- Barrie, essex UK, 06/02/2009 11:17
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It is about time the greedy Bankers where stopped from paying themselves bonuses,while they are in debt and Tax payers have a stake in the business.
- Stan White, leeds, 06/02/2009 07:12
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Lord Mandy wouldn't take a salary/bonus from the EU while also being paid by the UK Government would he?
- Joe, Thornton Heath, UK, 05/02/2009 18:47
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The horrible thing about all this is the biggest sleaze bag of all, Mandelson, saying they should be sensitive to public opinion. Every time he appears on the TV or starts his mealy mouthed platitudes I now feel physically sick and have to either swirch off or leave the room.
No politician has ever filled me with such a hatred.
- Ayliff Mcnab, Spain, 05/02/2009 18:27
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I so agree with Richard from London, I know people at RBS and have heard numerous times about their concern about getting their bonus - Get a grip - they should be happy and grateful they actually HAVE a job in the climate we're facing!
- S, London, 05/02/2009 17:52
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curbs? they should be locked up along with their political lackeys!!!...
- Daniel Powell, United Kingdom, 05/02/2009 17:48
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The bankers certainly deserve big bonuses for selling trash to the government, after doing the same to the rest of us.
- Ram2009, Reading, UK, 05/02/2009 17:39
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What bonus would they have received if the bank had gone bust ? Thought not.
Take back the taxpayers money and let them sink. Then see how many of their competitors are queuing up to hire them.
- Dave, sidcup, kent, 05/02/2009 17:25
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"But Lord Mandelson, the Business Secretary, warned: “The banks have got to be sensitive to public opinion.” Really, why? Nothing that NuLiebour have done makes this in any way legally binding.
In reality, Mandlieson, the Archenemy of Democracy, has no power to enforce these lmits. It is nothing more than political posturing.
- Keith Lonsdale, Doncaster, 05/02/2009 16:39
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Lord Mandelson, the Business Secretary, warned: “The banks have got to be sensitive to public opinion.”
Is this the same Lord Mandy of Pandy who, until recently, was on almost a quarter of a million quid a year, plus ridiculously generous expenses, and who is now earning a smidge less than that, plus "transitional relief" and even more ludicrous expenses?
He is in no position to lecture on the public's attitude to salaries.
- Nobby Clark, Perth, Scotland, 05/02/2009 16:15
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Bankers are paid well for success in the understanding there is nothing for them if they fail. That is the justification for competitive remuneration. The banks that find themselves with problems are in that position singularly as result of their executives not being up to the job. There is no external situation that they could not have protected their organisation from.
It would be a dumb organisation that ever employed so one that brought a bank to knees.
Anyone can succeed when things are doing well, only the tough pull it of the bag when times are difficult.
- Ian, Reading, England, 05/02/2009 15:36
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Tax the bonuses at 105 percent ad make the liability retrespective
- John Harris, High Wycombe UK, 05/02/2009 15:24
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NO. I work as hard & well as I can in my education-related profession and have never earned above £30k.Actually, I feel relatively well off, so why on earth do people already earning 10 times what I earn need bonuses aswell? If they love banking/finance work and find it intellectually stimulating, they should count their blessings.. and their salaries.
And no, I don't and never have used a credit card, and yes I live & eat well and have plenty of short holidays/breaks. Greed doesn't lead to happiness
- Qtip, Essex, 05/02/2009 15:20
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Just ask Gov to bail them out again so that they may have another bonus about time heads to roll but as per usual nothing will be done
- Mike, London England, 05/02/2009 14:58
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A lot of people do not seem to understand the concept of a bonus. Just because a Bank loses money it does not mean that all that institution's departments do likewise.
Its like a motor car sales room - if one salesman sells 10 cars and another 5 he will obviously benefit more.The amount of the bonus should be questioned not the concept.
- Peter Glazier, Sao Paulo, Brazil, 05/02/2009 14:41
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Absolutely disgusted to hear that RBS are going to pay bonuses to these people. How about RBS paying it's contractors their salaries? RBS still owe hardworking people, contractors, salaries from August 2008 and yet they have the audacity to even think of bonuses. Just shows the contempt upper management have for people!
- Alannah, Calgary, Alberta, Canada, 05/02/2009 13:29
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And about time too.
I have been voting against remuneration packages for the executives for years, because the pay does not reflect the job they are doing, being paid for doing not very well, if doing well at all and paying compensation to those executives who failed the company.
- Hugh, Middx, 05/02/2009 13:13
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its all very very wrong.
- Denis, Dublin Ireland, 05/02/2009 12:59
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Yes! Please ensure that any and all Bonuses that are paid since the governements loan, assistance, bailouts; are paid from the managements own pocket and past illegaly paid out bonuses, and unwarrented salery increases.
- A Winsley, London, 05/02/2009 12:50
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Well let's look to what President Obama is doing in the US. At least one world leader has some integrity. Have a good look Brown and follow the lead of someone who gives a fig.
- Sharon, London, 05/02/2009 12:34
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What is up with this gutless government!! Ban all bonus payments - these were the people who got us all in this mess to start with. I despair with the apathy in the country.
- Marie, Exeter, Devon, 05/02/2009 12:02
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Wheres the taxpayers payout then?, we also own the bank. And by my reckoning we should be charging you at least 31%APR by going overdrawn in the first place.
- Dc, London, 05/02/2009 11:28
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Their bonus should be that they still have a job. With any luck many of them soon will not.
- Richard, London, London. UK, 05/02/2009 11:10
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