Downing Street Says

Asked if the Prime Minister had made any suggestion that he supported the idea that people should waive their legal entitlement to bonuses, the PMS replied that on the question of legal entitlement, UK Financial Investments (UKFI) would be examining very carefully the exact nature of these legal commitments. Secondly, as implied in the question, the Prime Minister’s view was that for those who were in potential receipt of substantial payments to which they had a legal entitlement, they may want to ask themselves some quite searching questions about whether or not they should actually receive these payments.

Put that the review could take until the end of the year, the PMS replied that the Treasury were setting out terms of reference, but it was important to distinguish between, what some newspaper readers might not have entirely appreciated this morning, that we had taken action and had been taking action since last October. As the Prime Minister was saying this morning, last October when we bought shares, there was an agreement that there would be no cash bonuses for the board that year. The four chief executives of the two banks that received Government money left without severance pay. The board of HBOS had of course been abandoned. Seven members of the RBS board had left just in the last week. In relation to what happened to this year, there was a decision that needed to be taken in relation to RBS that had not yet been taken, and as the Chancellor was making clear yesterday that the bonuses for RBS should be the lowest possible, and that any individual associated with a loss should not get a bonus. In addition we were also negotiating with the banks the conditions under which they get access to the Asset Protection Scheme to insure some of the bad debts and bad assets on their balance sheets. As part of that, as the Treasury had been making clear, the Government would need to be satisfied with the remuneration systems that banks had in place. So we had been taken action since last October, we were taking action now both in terms of discussions with individual banks and more generally as part of negotiations on the Asset Protection Scheme. The review being announced by the Chancellor this morning was looking at how we moved forward and changed the culture within banks. Now this was not just about bonuses, bonuses were just one manifestation of what people would see as some of the issues in corporate governance in banks, we wanted to look more generally at what the governance arrangements were for banks, and that was what Sir David Walker’s review would look at. It was important not to confuse this review with the action that we had been taking, and were taking now, specifically into bonus payments in some banks.

Asked if the Prime Minister was comfortable that many of the former bosses of these banks were being rewarded by multi-million pound pension pots, the PMS replied that we would have to examine the exact legality of some of the commitments that had been entered into. In many cases these would obviously be binding legal commitments, but again he reiterated the Prime Minister’s view on the attitude that recipients should take.

Asked that when we asked people who were entitled to substantial bonuses to look into their soul, would the Prime Minister like to see them give the money to charity, the PMS replied that this was a matter for individuals. The Prime Minister’s view had been made clear that people who were in receipt of legal entitlement to substantial payments should ask themselves some searching questions.

Asked if the people the Prime Minister wanted to reconsider their bonuses, included banks that did not receive public money, and those who were not involved in any way with big losses, the PMS replied that clearly there were particular issues in relation to individuals to who were associated with losses, and secondly those who work for institutions that had been receiving a large amount of Government support.

Asked if the Prime Minister wanted a broader cultural change, the PMS replied that in so far as there needed to be a cultural change, that was something that we were discussing with the banks, and was something that the Walker Review would look at specifically.

Asked if the Prime Minister had ruled out any criminal proceedings against any of these bankers, the PMS replied that we would operate within the framework of the law, and if anyone had any particular accusations that they wished to make against any individual, then they should be brought forward. But there were authorities who had competence to look at these things.

Asked if UKFI were looking at the legality of the contracts would they also be assessing who they considered to be responsible, as this was quite subjective, the PMS replied that obviously we needed to be sure that where there were legal obligations these were watertight.

Put that David Cameron had said this morning that he thought there should be an overall corporate responsibility and if people were part of a failing bank then responsibility should be taken at all levels, whereas the Chancellor had talked about how some people were perhaps worthy of bonuses, in particularly lower down the food chain, the PMS replied that as the Chancellor was saying yesterday, in relation to RBS for example, in his view bonuses should be kept as low as possible, but of course we did need to recognise that it was in the taxpayers’ interests that these institutions succeeded in the future, so we were bringing in new management in order to replace the old management.

Asked if we were trying to have it both ways by putting moral pressure on people who were legally entitled to bonuses to give them up, whilst at the same time waiving through those being paid to people who were important to the bank, the PMS replied that the Chancellor made the position clear yesterday, which was that in his view bonuses at institutions like RBS should be kept as low as possible. Now clearly there were many people in these institutions who were not associated with the big losses who may not be receiving particularly generous salaries because they work in customer service or people who work as tellers for example, and we were not saying that these institutions as a matter of principle should not receive any bonus. But we were making it clear to RBS, and the Chancellor has spoken to the Chief Executive of RBS to make the Government’s views on this absolutely clear, that we did expect them to behave responsibly, we expected them to be mindful to the fact that these institutions would not be in existence without the support of the taxpayers, and we were asking them to keep bonuses as low as possible.

Put that a large part of discretionary bonuses were being paid to foreign exchange traders, and should we not be up front by saying that these people had made money for RBS last year and we wanted them to carry on making money for the taxpayer, and that was why we were prepared to pay them bonuses, the PMS replied that as far as he was aware no decision had yet been taken on exactly who should receive bonuses within RBS. But we were being up front about the fact that there should be no bonuses for people associated with any loss in any of these institutions.

Asked if the Prime Minister understood the sheer anger that taxpayers felt over this, the PMS replied that of course the Prime Minister understood, and he shared their anger. But as we said a few weeks ago, the Prime Minister being angry was not going to solve this problem on its own. We needed to find solutions and we needed to ensure that the banks continued to function as banks, not because we were particularly interested in supporting banks per se, but because we needed to ensure that lending flowed to households and businesses. So of course the Prime Minister was angry – he was very angry – but he was also focused on ensuring that we could find solutions that benefited the economy and the country as a whole.

Asked to be more specific about “anybody associated with any loss” as obviously anybody who worked for a publicly owned bank was associated with loss, the PMS replied that this was something that the Treasury and UKFI needed to work through with RBS, and that was what they were in the process of doing.

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» Friday, January 9, 2009

Bonuses

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