Regulation  

MP says RBS bonuses are crucial test for chancellor

Loss-making Royal Bank of Scotland will pay about £500m in bonuses in 2013, despite the string of allegations about fixing the London interbank offered rate, Chris Leslie MP said during a three-hour long debate in the House of Commons yesterday (15 January).

When life is getting harder for so many households and bank lending to businesses is falling, Labour’s Mr Leslie said it cannot be right for the chancellor to approve a doubling of the bank bonus cap when the taxpayer has a stake.

Mr Leslie said: “The House needs to know that RBS has reduced the number of bankers on its roll by about 2,000 in the past year.

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“One would therefore expect its pay bill to fall, and so it should, but that does not get it out of answering the question about the individual senior bankers who are earning £400,000 or more.

“Will the shareholder, in this case the chancellor of the Exchequer, give them permission not just to have bonuses of 100 per cent of their salaries, but to bust through that and go to 200 per cent of their salaries?

“That is a crucial test for the chancellor. Whatever the sophistry and warm words we might get from the Prime Minister, they cannot wriggle out of confronting that decision.”

Following the debate, Andrew Tyrie MP, chairman of the Treasury Select Committee, said: “RBS should be run on commercial grounds.

“Were decision-making at RBS to be subordinated to political considerations, it would be bad for the bank, bad for the taxpayers’ stake in the bank and bad for the wider economy.”

But he added the structure and scale of remuneration in banking have incentivised misconduct and excessive risk-taking.

Mr Tyrie said: “Risk and reward must be much more closely aligned, as the Banking Commission recommended.”