George Osborne tells banks to cut bonuses

 

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Chancellor George Osborne today issued a sharp warning to the banks against making big bonus payouts.

On the eve of the City bonus season, Mr Osborne said industry had not had "a particularly successful year" which should be reflected in the level of the awards.

Giving evidence to the Commons Treasury Committee, he said he would be taking a "keen interest" in the bonuses paid by the part state-owned Royal Bank of Scotland.

"I am clear that - given the fact that this has not been a particularly successful year for banking - you would expect to see bonuses lower this year," he told the committee.

Mr Osborne said he expected the banks to follow the advice given by the Bank of England to use any surplus cash to build up their capital reserves rather than distribute it in bonus payments.

"That advice should be heeded," he said. "The Financial Services Authority is currently going bank by bank to see whether they are compliant with that warning."

He made clear that he would be following the bonus awards made by RBS particularly closely.

"I would certainly expect to have many conversations with the RBS management about the bonuses which they may or may not wish to pay," he said.

"Of course my hands are tied on the bonus arrangements agreed by the previous government but when it comes to the new bonus arrangements you can be sure that this Chancellor will be taking a keen interest."

He said the taxpayer was still sitting on large losses as a result of the 2008 bail-out of the bank.

"There was a lot said at the time that we were going to make a killing out of RBS, it was a fantastic deal for the British taxpayer, we were buying at the bottom of the market, - gosh, who wouldn't want to do a deal like this," he said.

"We are many tens of billions of pounds underwater on our investment - if you put it like that - in RBS. I think, frankly, that is a reflection of some of the problems that RBS has had."

Mr Osborne reaffirmed the Government would be prepared to make additional funds available to the International Monetary Fund - in concert with other G20 nations - to bolster its resources for dealing with financial crises.

However, he stressed the cash would have to go to the general resources of the IMF and should not be a "substitute" for action by the eurozone countries for dealing with their debt problems.

"We are absolutely enthusiastic supporters of a well-funded IMF," he said.

"If there is a case to be made for additional IMF resources we should hear it from the IMF. If it is a good case then ourselves and other countries like Japan, like Australia, will look at that, I am sure, favourably.

"We would want to make sure that it is not a substitute for the eurozone also taking the action it needs to take to deal with the stability of its own currency."

The Chancellor confirmed that any additional contributions to the IMF would be subject to parliamentary approval.

"If I thought it was right to offer something more than the current parliamentary ruling provides for, then of course, by definition, that wouldn't be my decision. It would be Parliament's decision," he said.

"If we actually need specific parliamentary approval for it, then we will seek it."

PA

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