RBS chief defends bonuses despite £2bn loss
Royal Bank of Scotland made a loss of nearly £2 billion last year but still paid out £785 million in bonuses to staff, including £390 million to investment bankers.
The average bonus per group employee was £5,346, but the bank’s 17,0000 investment bankers received an average bonus of £22,941.
Bankers’ bonuses have come under intense scrutiny since the start of the financial crisis, with increasing calls for a radical overhaul of banks’ pay structure and performance criteria.
At the height of the banking crisis RBS was given a £45bn bailout by the government to prevent it collapsing, and is now 82 per cent state-owned.
Although the chief executive of RBS, Stephen Hester, recently waived his own bonus of £930,000 for this year, he has defended the bonus payouts to staff.
In an interview for Sky News, he said: “We believe in pay for performance and that’s exactly what we practise.”
He said that the 2011 bonuses has been reduced by 43 per cent to reflect performance, while the investment banking division, where profits fell 50 per cent compared with 2010, has seen bonuses cut by 58 per cent.
Mr Hester commented that the bank’s overall performance in 2011 was strong and the bonus payouts were justified.
Prime Minister David Cameron has also spoken out in support of the bonuses being paid to RBS staff, saying he was ‘content’ with the payouts.
Despite the £2 billion loss, RBS’s core banking operations achieved a £6bn profit and bad debts were cut by 20% to £7.4 billion.
Earlier this week Lloyds Banking Group revealed that it is reclaiming around £2 billion in bonuses from ten executives, including four board members, because of their involvement in mis-selling Payment Protection Insurance.
Banks and financial institution routinely sold Payment Protection Insurance to consumers along with loans and credit cards, in order to cover payments if they became unable to pay them.
However many of the policies were invalid because the customer did not meet the qualifying criteria and in some cases the cost of PPI was added to monthly payment without the customer’s knowledge.
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