Downing Street Says » Bankers’ Bonuses

Asked if the Prime Minister would look more favourably on the idea of returning to the status quo if the banks started lending again, the Prime Minister’s Spokesman (PMS) said that the Prime Minister had made the point before that banks were there to support the economy and support businesses through lending, and we wanted to see them do that. This was part of the discussion ongoing between the Treasury and the banks.

Asked if the Prime Minister thought that RBS should have the lowest bonus pool of any major UK bank, the PMS said that the Prime Minister had said over the weekend that RBS should not be leading the way, they should be a back-marker. There was a discussion underway between UK Financial Investments (UKFI) who represented the taxpayer and RBS, when that was concluded there would be an announcement from the company.

Asked if the Government took a role in looking at individual bankers’ bonuses, the PMS said that there was a discussion between UKFI and the bank. This year there were new Financial Services Authority (FSA) rules, which weren’t in place last year. For example, last year there was a discussion around ensuring that RBS bonuses were paid predominantly in shares and that there was deferral and claw back. Those things were now in the regulations the FSA had put in place.

Asked what the position was on bonus tax/bank levy, the PMS said that the Chancellor had said that we would set policy to achieve the maximum sustainable revenue from the financial services sector. When the bonus tax was introduced it was a one-off, and this Government had decided to introduce a bank levy.

Asked when the discussions between the Treasury and the banks would conclude, the PMS said there were two things happening: one was a discussion between the Treasury and the banks, which included issues such as lending, and the other was a separate discussion between UKFI (on behalf of the Treasury and the taxpayer) with the banks in which we had a stake.

Asked if UKFI would be talking to Lloyds, the PMS said yes, but Lloyds was a slightly different type of bank to RBS as it didn’t have the same big investment bank.

Put that the Prime Minister had said that he expected certain things from banks but at the same time didn’t want to micromanage them, the PMS said that the Prime Minister was saying that there were a number of different issues that needed balancing. For example, as a significant shareholder we had an interest in the way RBS managed itself and set pay policy. Equally, we didn’t want to get into a situation where we were managing that bank from Whitehall, because in time we wanted to see banks such as RBS return to the private sector.

Put that stakes could be used to effect a cultural change, the PMS said that there was a process established as to how we would deal with this, which was the same as last year.

Put that the last government kept these banks at a distance and would sell them off at the right time, the PMS said that that was this Government’s policy, and that’s what the Prime Minister had meant when he said he would not micromanage the banks; we were not going to write individual loans and we were not going to set pay for individual members of staff, because we thought they were best managed at arm’s length from Government.

Asked why the Government didn’t bring in legislation to bring about better transparency in banks, the PMS said that the matter was still being looked at. Before Christmas the Chancellor wrote to EU colleagues about our proposals, and it was something we were still looking at.

Asked if it needed to be done at an EU level, the PMS said that David Walker did a review for the Government and came up with some recommendations. The Chancellor wrote to EU colleagues following on from those recommendations.

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» Monday, January 10, 2011

Bankers’ Bonuses

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