Downing Street Says

Asked for the Prime Minister’s views on the bonuses at RBS, the Prime Minister’s Spokesman (PMS) said that RBS was a very important bank and Stephen Hester had said this morning that today’s figures marked a further step in the direction of the recovery of the bank. The Prime Minister had been the vanguard of making it clear that the old cash driven bonus culture had to end. He had been at the forefront of recommending international changes, which should be implemented by banks based here in the UK. RBS had a new approach to bonuses; Stephen Hester had waived his bonus this year. It was of vital importance that one of Britain’s biggest banks continued on the path to recovery.

Put that RBS were giving out rewards for failures, the PMS said that the only people who were going to be eligible for cash bonuses were those earning below a certain sum of money, so the approach that RBS was taking was completely in line with what the Government expected. Stephen Hester had made clear today that there was a balance between what needed to be done to retain good people and complying with new requirements. The revenue pay-out ratio in the investment bank was the lowest of any such reported ratio for other major investment banks in 2009, and the RBS board had reduced bonuses to take account of support from the taxpayer.

Asked if the Prime Minister was concerned about the public perception of banks and the bonus culture, the PMS said that the Prime Minister was concerned about what had been happening in the banking industry over the last few years regarding the irresponsible approach to bonuses. The Prime Minister was also very keen to see banks like RBS returning to good health, and the figures that RBS had published today showed that their core businesses were doing well. The Prime Minister had made it clear that we must move away from the old cash driven bonus culture and there was clear evidence that the concerns the Prime Minister had expressed were being addressed.

Asked if the Prime Minister accepted that the banking industry needed to pay bonuses in order to work, the PMS said that RBS was a good example of a bank that had taken on board what the Government expected in terms of the bonus culture; there were no cash bonuses for people earning above a certain amount of money; there was clawback; there was deferral and there was now a much closer link between the long-term performance and the share performance of the bank. The Government obviously had an interest in RBS as it was a large shareholder, and we wanted to get the taxpayers’ money back. For the time being it was important that we supported Mr Hester in his recovery plan.

Asked if the Prime Minister agreed with the Shadow Chancellor’s view that bankers were paid too much across the world, the PMS said that the Prime Minister had made it clear that one of the contributing factors to the financial crisis of two years ago was the irresponsible approach regarding remuneration and bonuses. Companies like RBS had to balance remunerating their staff in a responsible way with ensuring that they got the best out of those people. The Prime Minister recognised and understood the public concern that had been expressed about banking, but believed that it was important that the banks were seen to be taking the right measures, and what we had seen from RBS today was evidence of that.

Asked if the Prime Minister thought that RBS and other banks were setting a good example in regards to remuneration, the PMS said that every company needed to make its own decisions about remuneration, but the Government had set out what it expected in policy terms. UKFI had issued a statement this morning regarding RBS saying that it was about a change of culture as much as a change of policy. The RBS board had confirmed that proposals represented the minimum necessary to retain and motivate staff and therefore to protect the value of the taxpayer’s substantial investment in the bank. The structure of the awards included high levels of deferral, ensuring that all staff receiving a bonus and earning a salary of over 39,000 would have a significant exposure to the RBS share price alongside the taxpayer.

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» Thursday, February 25, 2010

RBS

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