James Moore: Hester plugged the huge hole in a sinking RBS

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The Independent Online

Sooner or later Royal Bank of Scotland is going to have to end the Mexican stand-off that has developed over its chief executive Stephen Hester's bonus. It is hard to see the bank's affable chairman, Sir Philip Hampton, in a cowboy hat with a pistol at the ready, Ed "the Kid" Miliband facing to his left, "Diamond" Dave Cameron and the Coalition posse to his right, and the brooding form of "Six Gun" Steve and the banking bandits opposite.

But a veritable gunfight at the UK Corral is certain to erupt when he pulls the trigger on Six Gun's seven figures. The view in banking circles is that Mr Hester should get his money. Despite putting his foot in his mouth with alarming regulatory, Royal Bank's chief executive appears to be plugging the enormous hole in what once looked like banking industry's Titanic. The share price has been sinking, but RBS is still just about swimming financially and is in sight of the shore. Although it could easily be knocked off course by that riptide called the economy, there has been no suggestion that the bank will have to call on the Government's "asset protection scheme". At least not yet.

What is more, by comparison to his peers Mr Hester is something of a pauper. Much was made of the £10m package he was handed when he joined RBS. But that was a maximum. Barclays' chief executive, Bob Diamond, might get that much just for last year's work. While running Barclays could hardly be described as a picnic, Mr Diamond is sitting comfortably in the saloon with a whiskey in his hand compared with what Six Gun has to put up with.

Sir Philip knows this. He also knows the debate over bonuses is even more heated this year than last year. The public-sector squeeze is now starting to bite. Inflation has remained stubbornly high and wages have come down. The view in banking circles is that having passed on last year's train robbery, they derived no great benefit. Their critics gave them five minutes of peace before returning with all guns blazing. This year they're planning to take the cash and the flak.

The public's unhappiness at such behaviour when even those banks that didn't receive a bailout were kept going by the billions of pounds of public support that was advanced to keep the whole financial system from blowing up simply doesn't register.

Caught in the middle of all this, Sir Philip is in a difficult position. The politicians are demanding restraint, but he also knows that if Mr Hester gets cross enough he might pull a trigger of his own and walk.

Sir Philip's views are in line with the industry's – Six Gun should get his seven figures. If that is true, then he ought to come out and say so. If that means getting shot at by just about everyone, so be it. The longer he dithers, the worse the firefight will be.