Government warning on bank chiefs' bonuses

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The Independent Online

Any bonus payments at Royal Bank of Scotland (RBS) must reflect both the overall conditions in the economy and the performance of the bank, Gordon Brown warned today.

The Prime Minister spoke as it was reported that RBS, which is being propped up with £20 billion of public money, is preparing to make payouts to thousands of the firm's senior staff.

RBS's investment banking division paid £1.83 billion in salary during 2007 - mostly in bonuses - and while payments for last year would be smaller, they would be made, according to The Times newspaper.

Mr Brown told a Downing Street news conference that the top RBS executives had already left without severance pay while there were no bonuses being paid to board members and no dividends to shareholders.

"I strongly agree with President Obama that a new approach, the one that we introduced in October, is required to reward senior banking executives," he said.

"Of course, we will bring forward further proposals as necessary. We expect whatever decisions are taken to reflect the conditions of the economy and the performance of the banks.

"There are no rewards for failure in what we are proposing."

US President Barack Obama has proposed a 500,000 dollar (£346,450) cap on payments to American bank executives who participated in the US bailout.

A Downing Street spokesman said the Government would only support any bonus payments to RBS staff through UK Financial Investments if they were consistent with the taxpayers' interest.

The spokesman said: "As the majority shareholder in RBS, UK Financial Investments is in discussions about possible approaches to remuneration.

"Any proposal would only be supported by UK FI if it is consistent with the taxpayers' interest.

"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."

Business Secretary Lord Mandelson today told RBS it risked alienating the public by offering "exorbitant" bonuses to its traders and senior bankers.

He said: "What I would say is please be mindful about how this looks and what public opinion will be."

The peer said the bank must strike a balancing act between keeping its best staff while considering public opinion.

He added: "Obviously you have to work in a market where you have got to recruit the best people, keep the best people in place and motivate them.

"But they have also got to consider how it looks and how it seems when those mistakes and losses have been made."

He said some of the reported bonuses could be perceived as "exorbitant" by people around the country.

After being asked about the proposed bonuses, a spokeswoman for the bank said: "No decisions have been taken yet."

RBS, now 68 per cent-owned by the Government, is due to report its 2008 results in three weeks, when it will confirm a loss of several billion pounds.

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