RBS/NatwestIn 2008 Royal Bank of Scotland (RBS, which owns Natwest) suffered the biggest loss in British corporate history - more than £24bn, forcing it to announce 9,000 job cuts. Despite this, former Chief Executive Sir Fred Goodwin - who had presided over the calamity - received a £342,000 a year pension, causing widespread public anger.
Under the reign of Goodwin RBS had pursued an aggressive expansion strategy. But in 2007, the bank overstretched itself with the disastrous acquisition of Dutch bank ABN Amro, leading a year later to a massive public bail-out of £20 billion. Taxpayers now have an 84% shareholding in RBS.
Last year, RBS won government approval to pay its top investment bankers £1.3 billion in bonuses - despite announcing losses amounting to an extraordinary £1.93 billion. The Evening Standard described how the 2010 bonus pot was ‘distributed among 22,000 high-performing deal-makers - an average of £59,090 each’ with some ‘getting awards that run into the millions’.
RBS is this year expected to unveil a £613 million loss. However, The Sunday Telegraph disclosed in January that Stephen Hester, RBS’s chief executive, ‘is on course to be paid a bonus of £2.44 million’. Bank sources were reported as confirming that the amount ‘will be paid in shares, which Hester can cash in after three years’. Hester has argued that his bank has to pay out bonuses at market rates to keep top performers because without them taxpayers will lose out.
However, as David Cameron pointed out before becoming Prime Minister, the UK’s bonus culture ‘encouraged short-term risk-taking instead of rewarding the long-term interests of shareholders and the public.’ Cameron therefore argued that ‘where the taxpayer owns a large stake in a bank, we are saying that no employee should be paid a bonus of over £2,000.’
As George Monbiot has explained, the government may claim they want to ‘tame the banks’, but in reality, they have been protecting them all along - not least by trying (and failing) to kill tougher European rules on bankers' bonuses. If the government won’t tame RBS and end the bonus culture, it’s up to us to act. It’s time to take back the banks so they serve everyone, not just the super-rich. After all, without us, they wouldn’t exist!
In the press
- Government approves £1.3bn of RBS bonuses
- RBS chief Stephen Hester awarded a £2.5m bonus
- More than 100 RBS bankers get a bonus of at least £1m - while business is still starved of investment
- Royal Bank of Scotland to be 84% nationalised
- RBS axes 3,700 jobs as taxpayer stake hits 84%
- RBS record losses raise prospect of 95% state ownership