Chiefs of bailed-out banks admit they will be paying staff £1bn in bonuses

THE BOSSES of two major British banks that had to be saved from collapse by a £37bn bailout by the taxpayer have admitted that some senior staff will be paid bonuses.

Stephen Hester, the new chief executive of Royal Bank of Scotland (RBS), which needed a £20bn cash injection from the Government, told the Treasury Select Committee that he took "no joy whatsoever" in paying out an estimated £1bn in bonuses.

He said that none of the RBS board would be given bonuses for last year and that they would also be withheld from "anyone at all associated with losses we've made". But Mr Hester said some bonuses had to be maintained elsewhere to motivate his 170,000 employees to turn the bank around.

Staff at HBOS – now part of Lloyds Banking Group – which needed £17bn from public funds, will continue to receive bonuses. The chief executive of Lloyds Banking Group, Eric Daniels, said the bank's lawyers had advised that the bonus contracts of former HBOS bankers had to be honoured, but that payouts for senior management would be "down considerably" on past years. The public has a 43 per cent stake in the new banking group.

The admissions come as Treasury officials fight to come up with a plan to stop the handing out of embarrassingly high bonuses to employees at banks saved by the state. An announcement could be made this week. The Treasury minister Ian Pearson told MPs: "I'm sure there is more to be said about bonuses." But Treasury sources said they were struggling to bring any pressure to bear on other banks such as Barclays, which has steered clear of seeking direct government help.

Mr Daniels said there was "much misunderstanding" among the public about the bonus system at his bank, revealing that two-thirds of bonuses at Lloyds were handed to employees on £17,000 a year.

Mr Hester admitted that banking salaries were too high and vowed to tackle the culture of guaranteed bonuses. "I empathise 100 per cent with the public mood," he said. "It would give me no joy whatsoever to pay any bonuses to anyone and if that was the responsible thing to do I would recommend that in a heartbeat."