Prime Minister David Cameron categorically said on Sunday that banks should cut their bonuses and the public anger is understandable. Appearing on BBC TV’s Andrew Marr Show, he said: “On the general, I want to see the bonus pool smaller than last year. On the specific Royal Bank of Scotland is owned by the government – they should not be leading the way on bonuses they should be a backmarker”. He was commenting on the Sunday Telegraph’s report claiming Royal Bank of Scotland CEO Stephen Hester is due for £2.5 million bonus payout.
Although RBS denied such developments claiming nothing has been decided yet, a person familiar with the situation claimed that the proposed bonus will be paid as stock options and the final allotment may be delayed by years. The Telegraph claimed that Mr. Hester’s overall remuneration may top £7 million.
Most investments banks will pay smaller bonuses this year on account of falling profits. The Centre for Economics and Business (CBER) had said in last October that in 2010, London’s financial services sector will pay out an estimated £7 billion in bonuses, down by 4 percent compared to 2009.
Commenting on Hester’s bonus amount, the Prime Minister said the number was “pure speculation” and no decision has been reached. When asked if the government can rein in banks on exorbitant bonus payouts, he said “absolutely”.
The government owns a large chunk of minority share in Lloyds and more than 80 percent in RBS, both it had given bailout money to avoid a possible collapse.
Saying that the banks need to return to profitability so that the taxpayer “gets its money back from those banks and that means they’ve got to be successful banks … and I want to be able to sell them back into the private sector to pay the tax payer back their hard earned money”, Cameron said.
The Prime Minister said he was against micro managing the banks by overseeing their daily operations. It’s easy to make the banks scapegoats for the crisis; he said warning against too much “banker-bashing”.
“I feel it because, frankly, the whole country suffered from irresponsible lending practices from irresponsible behaviour. We need to recognise though that there are a lot of people to blame for mess that we are in”, he added.
The British Banker’s Association (BBA) said it “absolutely understands concern over pay” and industry representatives are meeting with the government including cabinet ministers. The BBA is trying to strike a deal with the government on payout issues along with lending to small to medium enterprise