RBS chief defends staff bonuses

12 February 2009

Royal Bank of Scotland chief executive Stephen Hester confirmed plans to overhaul the cash-strapped lender's remuneration policies during a grilling by MPs over its financial crisis. He told the treasury select committee that pay in some areas of the industry was "way too high" and that he intended to be instrumental in ensuring it came down.

But he also defended plans to pay bonuses, despite a £20 billion bail-out by the government. "I sympathise 100 per cent with the public mood and if I thought it was a responsible move, I would not pay a penny," he told the MPs.

But he added that the bulk of the bank's employees "did what they were asked to last year and made profits. So when I consider how to treat them, the issue is how much worse can treat them than other banks". He added that payments were needed to retain staff.

RBS has been criticised for planning to pay bonuses to staff while being propped up by taxpayers' cash. The bank is 58 per cent government-owned, and there has been much public outrage over the seemingly excessive payments.

"I do think that bank pay in some areas of the industry is way too high and needs to come down and I intend us to lead that process," Hester said. There will be no bonuses of any sort to anyone associated with losses. I am clear there will be no bonuses at board level. There will be a reduction in bonuses at RBS greater than any bank I know of in the world."

Hester was appearing before the committee alongside fellow chief executives Eric Daniels of the part state-owned Lloyds Banking Group, John Varley of Barclays, Antonio Horta-Osorio of Abbey Bank, and HSBC UK managing director Paul Thurston.