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Government approves £1.3bn of RBS bonuses

Robert Peston | 16:49 UK time, Wednesday, 24 February 2010

I have learned that the investment arm of the Treasury has written to Royal Bank of Scotland's board, giving formal approval for the bank to pay £1.3bn in bonuses in relation to its performance in 2009.

RBS logoThe letter from UK Financial Investment has been sent today.

Although the total value of these bonuses is less than half the £2.7bn paid by Barclays, RBS's bonuses are more controversial because the bank is 84% owned by taxpayers.

The Treasury is in effect sanctioning payments to individuals that run to millions of pounds in some cases, even though these bankers can be seen as state employees.

However ministers believe that if they were to veto the bonuses, there would be significant damage to the value of the bank - thereby impairing the prospects for taxpayers to get back the full £45.5bn the Treasury has invested in the bank.

The bonus payments will also infuriate some critics for the separate reason that Royal Bank suffered colossal losses last year.

Ignoring one-off factors, such as gains on Royal Bank's purchases of its downgraded debt, the bank is thought to have made a loss of around £5bn in 2009. The precise loss number will be unveiled tomorrow when the bank publishes its results.

In the previous year, the attributable loss at RBS soared to a UK corporate record of £24bn - due largely to the collapse in value of the rump of the Dutch bank ABN, which Royal Bank had bought.

The loss in 2009 would have been significantly greater if RBS hadn't generated colossal revenues in its global banking and markets division - where the bulk of bankers work who'll receive the biggest bonuses.

The chancellor demanded the right of explicit approval over bonuses to be paid by Royal Bank when he agreed to insure the bank against losses on its poorer quality loans under the asset protection scheme.

RBS's directors were deeply concerned about his involvement in what they see as a commercial decision that should have been kept out of politics.

As I disclosed last year, the directors were given legal advice that they would have to resign if the chancellor forced a pay policy on them which they thought would damage the business.

He has chosen not to countermand UKFI's judgement that the £1.3bn in bonuses proposed by Royal Bank is reasonable.

On Sunday, Royal Bank's chief executive, Stephen Hester, waived his entitlement to a bonus for 2009.

Comments

Page 1 of 3

  • Comment number 1.

    £1.3 billion on a £5 billion loss, that after a £24 billion loss.
    Yes absolutely bonuses all round. Well done chaps !

  • Comment number 2.

    And so the cave-in begins...

  • Comment number 3.

    The merchant bankers still don't get it.

    If a business makes a loss then no bonuses should be payable. The bank would have been bankrupt without British Government support. There would have been no salaries let alone bonuses without government support. If these now state employees leave if no bonuses are payable then sobeit.

    Also I have read that there are 22,000 employees involved. £1.3bn divided by 22,000 = £59,090 each. A hefty sum, are these figures correct?

  • Comment number 4.

    Just confirms what most of us already know -
    The present government is unfit for office.

  • Comment number 5.

    Although in general I balk at the level of bonuses being passed to these investment bankers I am more interested in their ability to generate sufficient profits for us the taxpayers to be "off the hook". Providing Stephen Hester can keep these bonuses at " a minimum to keep them on the books" then I am satisfied as long as they continue to perform.

    I do find it strange that as a country we find it more acceptable to pay a Premier League footballer millions a year to kick a piece of inflated leather for three hours a week.

  • Comment number 6.

    Disgraceful....

  • Comment number 7.

    I hold no brief for the banks, but if one part of my company is making stonking profits and another is making stonking losses I will try to reward the guys who are making the money rather than pull everyone into the mire. Yet another argument for separating retail from investment banking - people just can't see the very real difference.

    And remember folks, half these bonuses are coming back as tax!

  • Comment number 8.

    Just to save the moderators a job - my mental comment has been removed by the moderators as it broke house rules!

  • Comment number 9.

    The Government should break RBS into its constituent parts and sell off the most profitable elements to stem the haemorraging of public debt starting with the investment banking arm. Alternatively, nationise the whole lot and pay peanuts until the whole group achieve a return for the taxpayer without whom none of them would be here today.

  • Comment number 10.

    So sad

  • Comment number 11.

    It's stunning really, isn't it? You can be part of a business that makes a huge loss, and rather than go under, as any other business would, the government bails you out with other people's money... That alone is incredible, but for the said government to reward you with stupendous bonuses for your incompetence is... well unbelievable.

    Will anyone vote in the next election - and if so why? When government no longer represents the people and lets the bankers do as they please, how much longer before the people in this country rise up and say enough is enough?

  • Comment number 12.

    7. At 5:40pm on 24 Feb 2010, Chanticleer wrote:
    And remember folks, half these bonuses are coming back as tax!

    Unless they are going straight into a pension pot

  • Comment number 13.

    #7 - HA - I know you mean well but surely the point here is that if your good guys are making massive profits but your bad guys are making even bigger losses then you are screwed because you don't have any funds to pay the bonuses.

    If your company had just lost £24,000,000,000 and then £3,700,000,000 do you think you would be rewarding 22,000 GOOD GUYS an average of £59,000 each.

    Do you think if RBS were your bankers that they would not raise an eyebrow or two at the annual review meeting for the facilities.

    This is what is wrong - we are funding their survival and will pay through taxes for them to have a job at all - they should not get bonuses - do you think if 22,000 all left and went into the market for a job that the other banks would all take them on - NO CHANCE!

    The market would be flooded with bankers and suddenly the bankers in a job wouldn't need to be paid high bonuses any more and we would finally have burst their bubble - massive success.

    But noone is prepared to follow this route - why? Because they all wine and dine together in the City and at Davos and its just the Old Mates Club and it stinks!

  • Comment number 14.

    Robert,
    RBS "generated colossal revenues in its' global banking and markets division"...if so, where have the enormous losses come from?
    Many of us have noted that chimpanzees could make money under these benevolent banking conditions....so what's wrong with rest of RBS?

  • Comment number 15.

    What about splitting the retail banks away from the casinos?

    RBS owns an excellent retail bank which used to stand on its own two feet before the lunatics took over the asylum. I have no problem as a taxpayer with owning or guaranteeing this retail bank at the same time as paying the staff sensible salaries with a normal year-end bonus based on profit performance.

    I begin to get into difficulties when I am expected to guarantee the trading of the casino banks as part of a package of ensuring I have a retail bank to use plus the disadvantage of paying huge bonuses to people who created the banking crisis in the first place.

    The whole thing is bonkers. It is wrong. It is a disgrace. It seems to amount to a form of blackmail in which the taxpayer is told they won't get their money back unless big bonuses are paid out. I am not prepared to be party to such a one-sided arrangement.

    It is time to separate the retail banks from the casinos, limit the taxpayer guarantees to the retail banks only, split the businesses and allow the casinos to float off into whatever parallel universe they want to inhabit. I bet that once the casinos are forced to stand on their own two feet then the bonuses will suddenly disappear.

    What does the government intend to do about it?

  • Comment number 16.

    What a sick system we live in.

  • Comment number 17.

    Outrageous. Beyond description, this shameful rip-off of the public and our country.
    The inustry has received 9 trillion dollars worth of support worldwide apparently. Half of that is interbank guarantees in the inter-bank market. Without the support the credit markets would still be in fizz and this ouwldn't be a recession, we would be in the midst of a full-blown depression (and that may still come.
    These guarantees by the tax payers of western countries are the collateral used to keep the banks ticking over right now.
    RBS would not be here were it not for us. It is all but bankrupt and these people are raking in the money, while millions of UK employees, are facing the dole and service cuts. Absolutely disgusting.

    Not one bonus to any banker would be flying into personal bank accounts without us.
    "never in the field of financial endeavour has so much money been owed by so few to so many - and, one might add, so far with little real reform" - see http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/10/bank_reform_the_radical_way.html

    Two words: Moral Hazard.
    The numbers who promised to leave this country were providing empty threats - the numbers of bankers applying to go to Switzerland has gone down! - see http://www.guardian.co.uk/commentisfree/2010/feb/22/bankers-executive-flight-tax-avoidance
    Break them up, now. Put them all on minimum wage. Put asbos on all of them for anti-social behaviour. Use the laws to take back all personal assets - you know those ones we apply to drug dealers.
    Do it Now.
    Refusal to be met with a 15 year-stint of crop picking in across the green lands of England wearing broad-striped suits. And matching cloth caps.

  • Comment number 18.

    It is quite simple. The government already knew from months ago that the very act of quantitative easing would generate big profits at the banks.
    That is why they did it.
    They also knew that the banks employees would get big bonuses out of those profits. As far as the government is concerned it is all worthwhile.
    The ultimate aim is for those profits to build the banks reserves back up to what is considered sufficient.
    As I have mentioned before - the banks are the UK.

    What gets my goat is that those companies - such as McCarthy & Stone - which failed with big debts owed to the banks, are now bank owned and more to the point bank nurtured.
    The banks are busy piling money into them as if nothing happened.
    If those companies were to cease trading, which they should, then there would be more losses piled up for the banks.
    So we, the taxpayers, bail out the banks that in turn sponsor failed companies under their wing.

    All totally unaccountable. And of course paid for by us. And do we get to tell UKFI how to deal with the banks? Nope.

    The banks are the economy. They do as they please.
    The bonuses are just a tiny sideshow.

  • Comment number 19.

    In the previous year, the attributable loss at RBS soared to a UK corporate record of £24bn - due largely to the collapse in value of the rump of the Dutch bank ABN, which Royal Bank had bought.

    Robert, please when you get a chance in one of your meetings with government guys, can you ask if anyone involved with the ABN purchase has been included in the bonus pool.

  • Comment number 20.

    If these figures are confirmed tomorrow when the annual report is announced officially, then this is at best quite surprising and very disappointing, but at worst unbelievable and outrageous.

    In summary:

    - £45.5bn bail out from taxpayers in 2008
    - £24bn loss on trading in 2008
    - £5bn loss on trading in 2009

    + £0.75bn bonus pot in 2008, reduced from £1.79, after protests
    + £1.3bn bonus pot for 2009
    + £342,000 annual pension for Sir Fred Goodwin

    It would be difficult to imagine that this is likely to improve by much either the image of RBS or the banking profession more widely with the public.

    Reducing losses by the margin that has been achieved over the last year is impressive. There is a need to ensure that great employees do not leave the bank, but there is an argument to say that they could/should have all bonuses deferred until the bank is turning a profit again at least, if not until it is re-privatised. Further substantial effort is still required to return the bank to the black.

  • Comment number 21.

    Do some retiring MPs think they maybe in line for a Directorship or 2 and so dare not stand in the way of this unwarranted largesse by the Taxpayer.

    As a shareholder I object to such ill concieved bonuses when it is proven computers perform just as well in trading.

  • Comment number 22.

    I think it is time that these people should be sacked without pay or their share holdings. The Buildings of the Banks and other related properties sold. The share holdings they have should be bought back by them at a high premium rate also any personnel financial interests related to the Bank should be taken from them and given back too the Taxpayers. This outrages of use of taxpayers money cannot go on. Pull the Plug on these failures

  • Comment number 23.

    RBS's directors were deeply concerned about his involvement in what they see as a commercial decision that should have been kept out of politics.

    So if they wanted politics out of their banking decisions, they should have made sure politics was kept out by not banging on our door and asking for rescue.

    It's like watching little whinging kids who don't think it is fair that they are being sent to their bed early and no pocket money on Friday because they broke all their toys.
    Tough. Don't break the toys then!
    Grow up Mr Banker. Take it like a man!

  • Comment number 24.

    Hmmm - reading points 14 and 15 one after another raises an interesting point. I am all for splitting the casinos away from retail banking and have blogged my concern as to why this has slipped off the agenda in the last couple of days.

    But if, as #14 rightly quotes RBS has "generated colossal revenues in its' global banking and markets division" then surely that means that the retail banking arm has generated colossal losses (to get back to break even) plus the loss of £3,700,000,000 (before bonuses of £1,300,000,000).

    Does this not mean that if you split the banks up then the retail sides would immediately collapse - how can the retail side be making such big losses - surely it is a very straightforward business model with very clear costs and exorbitant charges on all its customers?

    Surely the losses can not be as a result of write offs because they have already siphoned those off into some sort of other 'Taxpayers Are Idiots Structure'

    What am I missing?

  • Comment number 25.

    #7

    "...but if one part of my company is making stonking profits and another is making stonking losses I will try to reward the guys who are making the money rather than pull everyone into the mire."

    Meanwhile, in the real world, if your company is making losses you cut out the parts that make that loss and consolidate, you don't pay out 1.5 billion in bonuses to a select few and make the situation worse.

    Why do banks/bankers not work on the principle of supply and demand that other businesses do ? In any other industry, if the costs of labour are that high then they are off-shored or outsourced. Why is banking so different ?

  • Comment number 26.

    3. At 5:17pm on 24 Feb 2010, JohnXM wrote:
    The merchant bankers still don't get it.

    ==========
    Is UKFI packed with Merchant Bankers? Who picked them then?

    All Roads lead to Gordon.

  • Comment number 27.

    5. At 5:24pm on 24 Feb 2010, poorold pensioner wrote:
    Although in general I balk at the level of bonuses being passed to these investment bankers I am more interested in their ability to generate sufficient profits for us the taxpayers to be "off the hook". Providing Stephen Hester can keep these bonuses at " a minimum to keep them on the books" then I am satisfied as long as they continue to perform.

    I do find it strange that as a country we find it more acceptable to pay a Premier League footballer millions a year to kick a piece of inflated leather for three hours a week.
    ==========
    When the Government starts giving Taxpayers money to Wayne Rooney, let me know, I'll then demand he be transferred back to Everton.

  • Comment number 28.

    Robert - are all the bonuses in shares/share options? If so when can they be sold/exercised?

    Surely they are not cash as I think fleche_dor believes?

  • Comment number 29.

    7. At 5:40pm on 24 Feb 2010, Chanticleer wrote:
    I hold no brief for the banks, but if one part of my company is making stonking profits and another is making stonking losses I will try to reward the guys who are making the money rather than pull everyone into the mire. Yet another argument for separating retail from investment banking - people just can't see the very real difference.

    And remember folks, half these bonuses are coming back as tax!

    ================

    and remember folks, which part of the Company made the 24 Billion loss? Hmm, could it be the part that is now getting £1.3 Billion in bonuses?

  • Comment number 30.

    That £1.3bn should be going towards the creation and support of new and early stage companies.

    It just proves that this lousy Govt has absolutely no intention of rebalancing the economy.

    Scottish independence please. We can't afford Labour's economic incompetence anymore.

  • Comment number 31.

    I do not believe that public employees can receive bonuses....at 84% ownership I would consider these individuals public employees. This should not be allowed. I guess they will be buying all the foreclosed homes they created at reduced prices. There is no shame in banking, or ethics.

  • Comment number 32.

    I think I grasped the idea that here but, the reality not really. Royal Bank of Scotland want to pay there 'head honchos' £1.3 billion, when they made a loss of £5 billion in that financial year. The bonus is a carrot in front of the horses nose to make the top brass work harder thereby make more money and hopefully produce a profit that will ultimately lead to the £45.5 billion the Treasury has issued as bail-out money to be repaid to the rightfull owners of that money the tax payer. I say good luck to them they need all the help they can get, because if they aren't performing how the heck are we going to get our money back.

  • Comment number 33.

    #30

    "Scottish independence please. We can't afford Labour's economic incompetence anymore. "

    Hmmmm... Royal Bank of Scotland.

    Take it. Feel free to lumber yourself with the thing ;)

  • Comment number 34.

    Re DevilsAdvocate

    Why do you need Rooney back. The recent result looked good enough with him in opposition!

  • Comment number 35.

    It looks like RBS staff are reaping the benefit of being public sector employees.
    Everywhere I have worked the bonus culture was very simple - if the company made a loss (or even failed to make a big enough profit), then nobody got a bonus. Individual or even department performace didn't come into it. How any company can justify paying bonuses after making a loss of £5billion is beyond me.

    Even more depressing is the predictable response from Crash Gordon and Captain Darling. Lots of sabre rattling when talk of bonuses first surfaced, then no action at all in the hope that the problem goes away. The government has the right to veto any individual payment over £25k, but they are not even taking that simple step.

  • Comment number 36.

    "A commercial decision". It wasn't a commerical decision to bail them out. It was a commerical decision by the BoD to make loans on an empty box. It was a politcal decision for the banking lobbyist to block any regulations that would prevent this from happening again. They will never understand and therefore must be strictly regulated.

  • Comment number 37.

    Never mind the actual size of the ridiculous bonuses being agreed - we all know what we think of that - this just proves to me that the Bankers still don't get it - if they hadn't been bailed out by the peasants they wouldn't have an job - let alone a bonus - they are still living in ivory towers and choose not to accept the principle of accountability - when do we see the "retail only" banking which was dangled at one time? - they could go away and play with their own money then and get off of our backs!

  • Comment number 38.

    I despair at England I really do, just thank god I emigrated to Canada in Sept 2007.
    My recommendation to anybody with a bank account RBS or any of the other bankrupt state owned banks is to close your accounts and move them to the mutual societies may be just may be they would get the message then!
    Its disgusting any other private sector business and the directors would be given there P45 and shown the door.Businesses that I have worked for do not pay bonuses if no profits are made period! Time for some civil unrest methinks, work til you drop and pay higher taxes ordinary folk will not stand for it and rightly so follow Spains example protest!

  • Comment number 39.

    #34 Nick

    "Hmmmm... Royal Bank of Scotland."

    Name doesn't mean a thing.. Most of the big RBS shareholders were City based fund managers and it was regulated (or rather not regulated) by the London based FSA and came under the remit of the UK Treasury and the BoE.

    So you can keep it and we'll start another one and do it properly this time. :-)

  • Comment number 40.

    How insane is this, you screw up the western economy to the point were lots of nations were and still are bankrupt and then you get a bonus thank you very much.
    Just wait until the 3rd quarter earnings come in for most banks and western companies I am guessing they have dipped big time and don`t expect your average consumer to start spending again because its not going to happen,
    They are all saddled with debt for the next ten years what a complete mess!

  • Comment number 41.

    Do you ever get that sinking feeling in the pit of your stomache? The feeling that starts to creep up on you on sometimes on a Sunday evening knowing that Monday morning has nearly come around again. Well after reading Pesto's article, a tsunami size wave of that feeling hit me to the point I almost started to wretch!
    Surely it cannot be possible for any reasonable person to justify any bonuses at RBS whatsoever until ALL bailout money is rapid in full (and adjusted for inflation and Sterling devaluation); This is an absolute disgrace and I am outraged. How can these people be so far removed from reality? What on earth must they think of Jo public? Tey must hold us in total disdain and contempt.
    How dare they. Do they think we are stupid? We know that their whole "business world" is a giant ponzi scheme, that creates no wealth whatsoever and is no better than blatant theft of wealth from the poor.
    A good comment on this blog recently said that "the silent majority can only be offended so often". The tipping point for me has now arrived. Does anyone have any suggestions on how to go about "redressing the balance?"

  • Comment number 42.

    Nice to see the class system is alive and kicking still in the UK, jobs for the public school boys. How many of these bankers went to the same public school as the ministers who are supposed to be protecting our interests?
    Democracy is a sham when you have these guys covering one anothers butts.

  • Comment number 43.

    I have a request, please can we start expressing all values in their correct denominations, so if the sum is £800 Billion (£800,000,000,000) then we express is in both the short hand, £800Bn or something similar and also in long form, with all the zeros.

    I would also like to request that all percentages of something also be expressed in long form, so Quantitative Easing is not 7% of GDP, but is 7% of GDP and is £200Bn (200,000,000,000).

    I believe that if we start using the real values and figures, many people both dedicated and casual readers of these blog and posts will begin to understand the full implications of the numbers involved, particularly when they compare them to their own salaries.

    It seems to me that the politicians, media and the economists in general, use the short hand, partly because it is quick and easy, but also because the numbers are small with large multipliers which most people don’t understand and have no way of conceptualizing or visualizing.

    To be clear, £1,000,000 is approximately .25 meter cubed of £10 notes. Quantative Easing has made 50,000 of these piles of money, which is 50,000 cubic meters of £10 notes.

    Your help would be much appreciated.

  • Comment number 44.

    KeithRodgers wrote:
    "I despair at England I really do, just thank god I emigrated to Canada in Sept 2007."

    I'm starting to think that emigration is the best thing my familiy and I Keith. I'm not sure I want my young children raised in the society that has evolved here. Would you recommend it? I hear that Canada has oil that needs extracting (tar sand). I'm happy to do some digging - at least it is real wealth creation - until we find a more sustainable energy source of course!

    "Time for some civil unrest methinks, work til you drop and pay higher taxes ordinary folk will not stand for it and rightly so follow Spains example protest!"

    Agreed. We need someone to step up to the mark. There are a few posters on this blog that I would certainly follow.

  • Comment number 45.

    Alibino please read my comments on point 38, pull your money out and move it to a mutual society. The ordinary people need to take action thats for sure, your right it is time to take some action.
    The cash in the banks belongs to the people and thats the only way to make your point pull it out .

  • Comment number 46.

    30 Weescamp wrote

    "Scottish independence please. We can't afford Labour's economic incompetence anymore."

    Hmmm....Independence granted with pleasure. I thought RBS's the Shred was Scottish? Didn't he have a hand in the Dutch Bank takeover?

    Oh and when you scamper back across the Border could you take McRuin, Darling Darling and the rest of the North of Hadrians Wall mob. We can't afford them either!

    As to the performance of RBS, considering the unholy mess it was in last year, things have improved. At this rate Hester should deliver £19 billion profit (work it out) and then we can sell RBS and send it back north of the border!

    Mind you my cousin who does live north of the border, would like some return on the money he wasted on RBS shares. I have invited him south of the border to commiserate with me on my Lloyds investments, which were trashed by H Bank of Scotland.

  • Comment number 47.

    a means to an end. if it helps get the banks back to profitability, so be it. in five years the credit crunch will be forgotten, and we wont have another banking crisis for twenty years.

  • Comment number 48.

    mugger: this is a stickup! gimme all your money...
    banker (throws hands in air, one fist is full of cash): hi! ah - I don't have any
    mugger (gestures at fist): gimme! I can see it
    banker (looks in surprise at his fist): oh! that's not my money u c
    mugger: I don't care whose it is! just gimme!
    banker: if I give this to you, millions of families will suffer, homes will be repossessed, loans called in, business will close, unemployment will explode and the banking system will collapse!
    mugger: err..
    banker: look, it's simple, I cannot be allowed to be poor, or the world ends, and that means your family, your house, your loans, your job and your bank account get toasted.
    mugger: oh.
    banker: this is a stickup, gimme all your money....

    [... reposted from http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/12/made_off_with_all_our_money.html ...]

  • Comment number 49.

    K Dale: #47

    What bank do you work for? "Credit Crunch", you must be kidding. It was a planned theft by the bankers of over a trillion in personal accounts and the stalling of the world economy for bankers greed and personal gain. They should be in jail.

  • Comment number 50.

    Hi Allibino, Yes I do recomment it head to Canada or better still Asia they have booming GDP figures.I saw this mess coming in 1999. I said to my boss at the time if the UK keeps off shoring there will be nothing left but paper shuffling by the financial services.
    So I made plans to leave in 2004, Alberta oil Sands has more oil reserves than Kuwait and yes Canada has huge oil and gas reserves. Its a great place to live I would recommend it to any middle England people that are cheesed off with the UK. Vote with your feet I did and I never looked back.
    I moved my family over here for the same reasons - cost of living, crime, traffic jams etc just had enough of high taxes and poor wages.

  • Comment number 51.

    K DALE wrote:
    "a means to an end. if it helps get the banks back to profitability, so be it. in five years the credit crunch will be forgotten, and we wont have another banking crisis for twenty years."
    Karen, can you provide some of the empirical evidence you have used to form your opinion please. And perhaps some further explanation at the thought process you have been through to arrive at your conclusion. I would welcome the chance to review them to see if I can be persuaded that your opion is correct.
    Thanks

  • Comment number 52.

    A successful ecomony is not built on financial services and interest on loans. Look at Germany, Japan, Korea, China, India they all focus on manufacturing and making things.It provides jobs and disposable incomes for everybody not just a good jobs for a few bankers.England screwed up when it put too much dependance on financial services and now its paying the price big time.
    Consumer consumption has stopped because the credit has run out, it just goes to show how the general public depend on credit to be able to afford to live in the UK.Living in hock to the bank was not my idea of life so I got out, a lot more middle England people will come to that conclusion now.
    The tipping point has been reached and they know it.

  • Comment number 53.

    Bankers and there performance was it an hidden angenda from day one?

    The bankers in the west have had a good lifestlye from UK consumers for along time.Basically selling us any product they like eg endowment mortgages (scam No1), pensions(scam No2), unemployment protection insurance(scam No3), etc all of which performed badly but gave them the huge bonus!
    Seems like poor judgement or was it ?, how can any of this make sense these guys are clever right they are trained professional people. What if they were meant to fail, all of these products were just a means to an end. The objective was clear to claw back as much of our wages so that the income could be redirected into Asian companies. In effect we have financed our own demise, multinational companies have been part of this scam too using there western workers pension funds to build new factories in the far east.
    They have been doing this for the last 20yrs and then turning round to the UK employees and saying there business has gone in to administration & hence no pension fund.Slowly but surely they are all pulling out of the wests mature markets and going to much greener pastures of Asia.
    Just shows you how corrupt the system is when you use the average Joes wages against him or her.
    I think the stimulus money will go the same way, its certainly not being used to fund UK businesses so were is it going, overseas investments!
    We are being duped big time.

    Only when you look at the bigger picture do you see any sense to all of this chaos.Open your eyes look for motives behind the actions and it all becomes clear.

  • Comment number 54.

    I am going to stick my head above the parapet on this one...

    K Dale - I agree. I am NOT happy that we are paying bonus money to a bank that has racked up these incredible losses mainly because of failure in regulation (government) and failure in competence (banks).

    HOWEVER,

    consider this:- what if NO bonus money was paid at all and those people who were highly regarded AND could make money. The notional value of these banks would gradually shrink as the other banks hired away the talent (I am sure there are some) and this WOULD crystallise the loss to the taxpayer BUT we'd still have liability for all the bad loans. WHOOPS!
    Now no-one can say this wouldnt happen or would but if the actions of the bank decrease value then it will make it worse for all of us.

    So to reiterate and agree with K DALE. It is a means to an end.

    LET THE STONING BEGIN......

  • Comment number 55.

    I imagine this is profit related pay; so all staff under the parent company RBS will get something - a few hundred quid for the bank tellors etc.

    Still riduculous though. As a self employed Joe, if I had a couple of bad years, and then returned to profit, would I pay myself a 'bonus'.....NO! I would replenish the reserves to protect myself against future dull periods. Simple economics really, which these organisations fail to heed to, because Bank of Mum and Dad will bail them out.

  • Comment number 56.

    In the English language, named numbers have a consistent meaning only up to “million”. Billion can be one of two numbering conventions: the “long” and “short” scales, and “billion” can mean either 109 or 1012.
    In the UK a billion means a million million.
    In the US a billion means a thousand million.

    800 Billion in the UK would have 14 zeros (800 000 000 000 000) but 11 zeros (800 000 000 000)in the US.
    Best to stick to SI units I find, but this is yet another arena where the financial industry spivs set themselves apart...

  • Comment number 57.

    53. At 9:21pm on 24 Feb 2010, KeithRodgers

    Aye.

  • Comment number 58.

    For our wonderful elite and the fabulous Establishment it's "business as usual."

    How long, I ask, before the politicians use it as a "genuinely serious," EXAMPLE of grounds on which to demand big pay rises for themselves? (I give it 6 months. Should be about enough time for the new lot to get their feet under the table and cobble together a cunning plan to further fleece the taxpayer!?)

  • Comment number 59.

    56. At 9:47pm on 24 Feb 2010
    See if these tags work!
    If not it is 10 to the power 9 not 109 and 10 to the power 12 and not 1012!
    Billion can be one of two numbering conventions: the “long” and “short” scales, and “billion” can mean either 10 or 10.

  • Comment number 60.

    I've lost the energy to comment further on this!

    All I can say is that the likes of WOTW, Dempster, Cartier and many, many others (sorry for not mentioning you all) in the past have commented, far more eloquently than I, on the common sense feelings on this crime and fraud on all of humanity.

    I may have stopped posting.....but I will never, never forget.

    As Barrie Singleton has often commented....'SPOIL PARTY GAMES'....and....'WISE UP THE YOUNG'.

    God save us all!




  • Comment number 61.

    The problem with this approach is that politicians talk big and curry public support but they then act almost as puppets of the bankers.You say that Chancellor Darling took the power to stop these bonuses, so under what circumstances if not now would he use them? Having been a follower of notayesmanseconomics web blog for a while his analysis of many of these moral hazard issues has been pretty accurate.Our politicians keep falling into these traps.
    One of the ways these bankers have made money is from the cheap money the Bank of England has given then, anyone with any sense would deduct this from the bonus pool.

  • Comment number 62.

    I think it's great that so many people have such strong opinions about what is happening, but amongst all the despairing cries of "how long do they think we will put up with this?" is anybody actually DOING anthing? Adding comments to Robert Peston's blog may be a good way of getting something off your chest, but maybe the disgruntled message could be directed somewhere more appropriate? Maybe toward ministers?

    And shouldn't the prospect of spending so many billions on bonuses demand some kind of public vote as recently in Iceland? As owners of the bank, shouldn't we -- the shareholders -- have a say in the level of bonuses paid? It's our money, after all.

  • Comment number 63.

    "the taxpayer could come out of this making a tidy profit"

    Remember that?

    Oh dear - what will the excuses be this time? I suppose it's an 'improvement' on the previous 24 Billion loss, but did anyone expect any different?

    ...only the delusional

    "The loss in 2009 would have been significantly greater if RBS hadn't generated colossal revenues in its global banking and markets division - where the bulk of bankers work who'll receive the biggest bonuses."

    This is hillarious - so the losses would have been worse if the 'funny money division' wasn't able to produce 'profits' from Government QE!

    Better give them a pay rise then - should hasten the demise of the patient, it's the humane thing to do.

  • Comment number 64.

    For those considering leaving - where are you going to go?

    http://static.seekingalpha.com/uploads/2010/2/14/saupload_cs_risky_30.jpg

    Nowhere is safe - not places you and I can afford anyway.

    Best to stay here and fight

    We'll get our money back - we'll take it back.

  • Comment number 65.

    62. At 10:48pm on 24 Feb 2010, Bob wrote:

    "I think it's great that so many people have such strong opinions about what is happening, but amongst all the despairing cries of "how long do they think we will put up with this?" is anybody actually DOING anthing?"

    Yes, we're discussing how much longer we'll put up with this before we do something.

    "Adding comments to Robert Peston's blog may be a good way of getting something off your chest, but maybe the disgruntled message could be directed somewhere more appropriate? Maybe toward ministers?"

    ....now that would be a waste of time - they're no longer in control - didn't you know they owe the bondholders (that's largely banks and the uber-rich) billions?
    When has a borrower ever been in charge of his lender?

    All those who want to do something, seek out the next protest, don't worry too much about the cause, swell the numbers, put fear into the state and the bankers.
    Fight for our jobs, fight for our future.

  • Comment number 66.

    ...and now it's time for bed.

    Early to bed, early to rise, makes a man healthy, wealthy and wise.

  • Comment number 67.

    #64. writingsonthewall wrote:

    "We'll get our money back - we'll take it back."

    But, by your own admission, WOTW, you are a banker. And the general consensus on this blog is that all bankers are the same. Therefore you are part of the problem, not the solution.

    Or are you saying that there are good bankers and bad bankers after all?

  • Comment number 68.

    Defenders of the bankers are quiet tonight. Have they given up?

    When Rolls-Royce were bankrupt and nationalised and pulled Stanley Hooker and some other veteran engineers out of retirement to turn around the RB211, does anyone know what they paid him? Probably not enough to keep an investment banker in sandwiches. And, by the way, Hooker had a first degree from Imperial College and a PhD from Oxford, if I remember rightly. Possibly the greatest engineer that’s ever lived, it’s a pity that he didn’t have the sense to do something useful instead of stuff like the Merlin supercharger, Pegasus and RB211.

    Bankrupt - it would be nice to have a banker discuss the meaning and etymology of that word, he might have a different view from the rest of us, at least as applied to himself. If you are relying on other people’s money to save your company can you honestly accept a bonus? Some say that they need it for motivation. According to the psychology books normal, honest, comfortably well off people are not particularly motivated in their work by bonuses. They are motivated by the sense of winning, which, in the case of an indebted bank, would be paying back your debt.

  • Comment number 69.

    Well well well Bob, so the scoundrels are at it again. Do you know something, I'd really like a slice of all the lovely public dosh we're generously donating to those misunderstood bankers pigging-out on public money. There's a simple solution to all of this misappropriation of public funds Bob, dump the investment arm of the bank and let them walk. My God, if you ever thought that somehow, just somehow, all those conspiracy theorists were nutters, think again, it's a rip-off, but they don't care. Why should they care, they know we know how they operate now, they have nothing to fear. They can do anything they want. Hey Bob, by the way, do you really think it was wise to bail out these crooks? Not me. They should have gone under, along with the discredited political elite that wait at their tables.

  • Comment number 70.


    Sadly, the age of effective protest is over. The best we can hope for is a hung parliament, a crippled setup of backbiting, nimbyism and blackmail, where nothing will be done. I used to be idealistic and ambitious to effect change, now I am resigned to self interest as I can't see any way to alter the course of society. We as a society should be thinking about how to pay for the baby boomers to retire & die gracefully and in comfort, not transferring vast amounts of taxpayers future payments (QE etc.) to a few already wealthy individuals. And also how to assure a reasonable future in an energy limited and increasingly populous world, with a potentially much more lively climate.

    The new power of society is in the leverage of the internet, ie the fact that after reaching a critical mass, you become the defacto monopoly such as amazon, google, ebay etc. The unhappy masses must some how use this amazing feature to alter the way we are governed. Until blogging on Pesto's musings becomes the new google, no politician will act.

    Good luck.

  • Comment number 71.

    Bob: they're all crooks. They're in the process of thieving from the public purse and they're enjoying every minute of it. What a corrupt discredited bunch of wasters they are. My God, what have we all done to deserve this? I'll tell you what: zippy, nothing, zero. They do it to us because they can. As long as our political elite wait at their tables there'll be little or no change to the system.

  • Comment number 72.

    It is a fascinating further example of asymmetric risk. How do we ever resume normal business from this. The message gov't has sent is - you bet big - you win, you keep the lot, you bet big, it goes against you, you don't even lose your stake. It has moved up from Buy-to-let landlords through to subprime debt now to sovereign states. Why should the individual feel duty bound to pay their mortgages.

    I was thinking - what we, the mugs who are bankrolling this little party to do is this. Take out short positions on the FTSE and/or banks. They engage in the old 'no shopping day' - except with our mortgages. Everyone in the UK stop paying their mortgage for a month or two.

    Scorched earth, I know, but think of the gains on those shorts you'd make! And how satisfying it would be to see the boot on the other foot for once, us owing the banks something....

  • Comment number 73.

    What I don't quite understand, is where all these "mega profits" come from?

    I mean, so we give a bank say 100bn and they lend it out to someone. That must generate some percentage of 100bn (lets say 10% to keep the figures simple). So where else does the "profit" come from? Its surely not just the straight %age of "profit" you get from lending is it.

    What worries me, is that the so called profit is just another magical thing that somehow bankers use to pretend they are doing an important service to the economy. If this money isnt from straight lending for a percentage, then it has to be something far more dodgy doesnt it?

    Which means the mega profits are dependant on mega risks, which is what got us here in the first place. So we're using dodgy deals to make mega profits to pay for the bail out of the dodgy deals.

    See where I'm heading? It just cant make any sense.

    Personally I'm looking at Malaysia. They are fairly Brit friendly, have at least a smattering of english and it seems you can live quite well there on typical UK savings. Last one out turn the lights off!

  • Comment number 74.

    writingsonthewall wrote:
    For those considering leaving - where are you going to go?
    Nowhere is safe - not places you and I can afford anyway.
    Best to stay here and fight
    We'll get our money back - we'll take it back.

    OK, so maybe this is a test of peoples' human "Fight or Flight" survival instinct; Although it goes completely aginst my pacifist nature, I might be inclined to turn away from the path of least resitance ("flight")and opt for "fight" depending on what it involves. Is it possible to be an "agressive pacifist"?

    Anyway, I don't want my money back - I now understand that it's worthless. All I want is to raise my children in a fair society. One that educates them with the skills required so that they can in turn contribute by generating real wealth when they grow up. It would be nice if I could have at least a couple of years retirement in the end but I'm not counting on it - there's lots of tar sand that needs digging up in Canada in order for us to can keep warm!



  • Comment number 75.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 76.

    If the payments are in the individuals contracts then they should be paid. None of you would want the government to arbitrarily interfere with your contract of employment. Once there is no respect for contract and private property we are on the slippery slpoe to totalitarianism. The weakest reason for not paying the bonuses is the constant bleating from left wing confiscators on this blog. The court of public opinion indeed.

    # The taxpayer does give Wayne Rooney money indirectly though the licence fee to the FA / Premier League for highlights etc.

  • Comment number 77.

    This is thoroughly disgusting and disgraceful. People everywhere are wondering what the future holds for them and the system rewards failure with our money to the tune of a billion plus.

    How much more will people take of this?
    Will this spark off riots in protest I wonder?

  • Comment number 78.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 79.

    I suppose the big question for voters is whether a Conservative or Lib-Dem government would do any different?

    If they would then that is one of the differences between New Labour and the other parties.

    The only way to protect your money is to remove it from the banks but then where do you put it.

    Emigration has been proposed but as a outsider in a foreign country would you be any better off? Certainly, for a lot of retired people and those close to retirement this has come as a nasty shock.

    Maybe we just keep it under the bed and take steps to protect it from fire and burglary.

  • Comment number 80.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 81.

    @76, truths33k3r wrote:

    "# The taxpayer does give Wayne Rooney money indirectly though the licence fee to the FA / Premier League for highlights etc. "

    Really, if that makese sense, then we should have left the bankers to be saved by Rupert Murdoch and Sky television. We could have saved ourselves a bag of money.

  • Comment number 82.

    So so far we have Canada, Australia and Malaysia recommended as places to start anew. Does anyone else have any other suggestions?

  • Comment number 83.

    Well, here we are again.
    Same old arguments, tired cliche's about keeping the best staff and so on.

    Well, how about pay rises for the Public sector , to keep the best staff there ?

    Oh no, wait different value judgements are made there, their jobs are not considered trendy by the social elite and the old boys club.

    And what about the way of life of the people in Britain ? What about quality of life for those who do not have a Job that pays enough ?

    More attention needs to be given to building a proper economy that creates useful roles for all the populace, not just mathematically constructed artificial bonuses for the chosen few.

    Too many politicians are blinded by their obssessive belief in Monetarism.

    Controlling or restricting the money supply will not in itself create Jobs or wealth out of thin air !

    Practical pragmatic action needs to be taken to bring wealth and job creating businesses into existence.

    If Britain cannot compete with artificially low exchange rates or poverty wages abroad, then Gov't action should be taken to level the playing field.

    At the end of the day where is the profit to the people of Britain if a few can buy cheap imports whilst many more have no job ?

    Where is the logic to that ? There is none, except to the importer and reseller of such cheap goods who has a vested interest in their profits.

    But belief is a strange thing, and the Investment bankers believe, despite the huge losses and economic their Caste has caused in earlier years, that they deserve to live in a luxury most ordinary people can only dream of.

    Personally, I subscribe to the smoking boots school of investment banking rewards, luckily for them there aren't enough Thunderbolts to do the policy justice, no matter how delightful the thought may be.

    The Investment bankers of course will not change their beliefs, even if it is in their own best interests, preferring a whole jam factory today despite what such a policy may bring them in future.

    And truth is a funny thing too. These investment Bankers like to interpret truth in ways that are purely to their benefit, and largely they go unchallenged. Going unchallenged does not mean their beliefs are true.

    Scientific thought requires questioning everything, and maintaining an open mind.That they have refused to deal with the problem of packaging and reselling loans and mortgages (in my opinion an unnecessary thing to do) and the rating of such products, really sums up their blinkered, unscientific view.

    Of course great Bonuses are made by Bankers bouncing packaged Loans around amongst themselves.

    Perhaps more dramatic means are needed to bring the points home, (must recheck Thunderbolt supply, hmm), snow perhaps is too soft an option.

    Of course, I am basically opposed to inflicting beliefs on others thro force, however, Bankers,Politicians, Economists of monetarism, like all priests through out history, go to great lengths to lay the chains of their ideas on the shoulders others.

    And those who don't believe (obey) them, at best get sidelined, at worst get blown up etc, etc.

    But people get the world they make for themselves in the end.

  • Comment number 84.

    Stop complaining - would you rather the bank didn't pay bonuses, the bankers leave to somewhere that does ?

    What value would there be in RBS if that happened ?

  • Comment number 85.

    newshounduk wrote:

    The only way to protect your money is to remove it from the banks but then where do you put it.
    Emigration has been proposed but as a outsider in a foreign country would you be any better off? Certainly, for a lot of retired people and those close to retirement this has come as a nasty shock.
    Maybe we just keep it under the bed and take steps to protect it from fire and burglary.

    NewshoundUK. For me this isn't about money any more; its about fairness. Everyone contributing to a society in a way that allows the continuation of the human race. What we have in the UK is a system where the minority rich are legally allowed to to steal the wealth we have created for our familes through hard work and labour; they are too busy to do real work because they are deciding which vintage champagne they prefer.
    Money is just debt; they are welcome to what I have of that (and I have a fair bit of it). It is the real wealth I have earnt (and will earn), and the future wealth that my children will earn that I beleive is being stolen. Enough is enough.

  • Comment number 86.

    I'd just like to say, look out UK banks.
    The Latvian Robin Hood may well have paid a visit or be about to. Judging by media reports today of what has been disclosed, I wish he would do the same for UK banks and we might have some real transparency about the bonuses and profits and how they were generated instead of all this hot air and postulating.
    No disrespect meant, Robert. Your columns are interesting but few ever get to see what i would call the 'real truth of the matter'.

  • Comment number 87.

    One question about the windfall bonus tax

    Can the tax be offset agains losses (in either the current year or previous years) or does it have to be paid?

  • Comment number 88.

    Why can't there be a law that says a company has to make a profit AND pay tax BEFORE it can pay bonuses?

  • Comment number 89.

    kedz wrote:
    Stop complaining - would you rather the bank didn't pay bonuses, the bankers leave to somewhere that does ? What value would there be in RBS if that happened ?

    And who are you to tell me to stop complaining? This is the exact attitude that towards others that has infected this nation and we are a lot poorer for it.

    To answer your questions: Yes I would rather the bank didn't pay bonuses; I am happy for them to leave to somewhere that does pay bonuses (when a real profit is made) and also left to go bust when they don't.

  • Comment number 90.

    The buck for this stops with the Labour government. They've done nothing of substance despite their words to sooth the public, which is consistent with their 13 'lost' years in power. But some of the responsibility must also be shared by everyone who parrotted in agreement that there was a need for a bail-out in late 2008. I remember not signing up to the view that prevailed amongst seemingly everyone who had become a sudden financial expert and/or swallowed wholesale what they were being told by the same "experts" who'd created or presided over the mess in the first place. And I remember being laughed at when I said the very same people being bailed out would be paying themselves the same bonuses just one year later. "It couldn't possibly be so - there'll be a great depression if we don't act, and things will be different if we do act." Well, I interpret a full recovery 1 year down the line as the problem being grossly misunderstood and handled in the first place, not a vindication of a bail-out. Half the banks had been prudent and not reckless, requiring no bail out, and I'd be delighted today if the bad ones had been written off, their business picked up by the others, and their "experts" put out of a job. This is what happens in every other industry in our capitalist system, and is the only way to reform something that's rotten. There were many other ways to handle the financial crisis, but we'll never know now, since no-one who wanted a discussion about it at the time was listened to in the hysteria promulgated by the media. A massive lost opportunity. So act in haste, and repent at leisure while we watch these bonuses grow even more in years to come...

  • Comment number 91.

    Robert suggests most of the profits come from the 'global banking and markets division'.
    Please can we have a full analysis on the source of these profits and therefore discover what these monumentally talented people are actually doing ...

  • Comment number 92.

    Allbino wrote:

    " And who are you to tell me to stop complaining? This is the exact attitude that towards others that has infected this nation and we are a lot poorer for it.

    To answer your questions: Yes I would rather the bank didn't pay bonuses; I am happy for them to leave to somewhere that does pay bonuses (when a real profit is made) and also left to go bust when they don't."


    Complaining is seemingly a national past time this days - I don't understand what value it adds ?

    You say you are happy to let it go bust... What happens to all that Public Money that was pumped in ? Are you happy then to write that off forever ?


  • Comment number 93.

    For clarity, when I say a "real proft is made", I mean a REAL increase in REAL WEALTH

  • Comment number 94.

    # 87 Icewombat: To answer your question

    The bonus tax is can't be offset. It is basically just like a payroll tax and therefore difficult to avoid - esp as Darling was clear that he'd pursue any avoidance schemes.

  • Comment number 95.

    #91 Nick,

    You can analyse what they do yourself. Go to the RBS website and read the annual report. There is segmental reporting which will allow you to read a summary of what GBM does, as well as its results.

    As a shareholders I guess it is our duty to inform ourselves. The info is out there.

  • Comment number 96.

    62. At 10:48pm on 24 Feb 2010, Bob wrote:
    I think it's great that so many people have such strong opinions about what is happening, but amongst all the despairing cries of "how long do they think we will put up with this?" is anybody actually DOING anthing? Adding comments to Robert Peston's blog may be a good way of getting something off your chest, but maybe the disgruntled message could be directed somewhere more appropriate? Maybe toward ministers?


    Well We are not Happy at facebook

  • Comment number 97.

    If the 'too big to fail' argument had been waived and the investment banking operations had been allowed to go bust last year, then a lot of these 'bright, clever idiots' would be out of work. In Schumpeter's 'process of creative destruction' the better managed banks would have picked up the pieces and the people who were worth something and the rest would have been discarded to the job centres. The only people who should have been protected were the ordinary savers' accounts. Bond holders and equity holders should have paid the price for backing the wrong investment and managers and staff should have paid the price of their employment. That would have been a normal market clearing operation. Instead, we have politicians running around offering bail-outs with our money and central banks printing money like there is no tomorrow. This has been such a missed opportunity; but as always, the bankers have conned the politicians into believing they are priceless. Well, in one respect I guess I could agree with that sentiment, but my interpretation of 'priceless' is less than complimentary.

  • Comment number 98.

    I think it is now reasonable to assume that as far as rebalancing the economy goes nothing has or will happen.

    I now expect the wealth gap to widen, house prices to go on increasing, the trade gap to grow further, household debt to increase again and UK owned manufacturing to decline further.

  • Comment number 99.

    kedz wrote:
    "Complaining is seemingly a national past time this days - I don't understand what value it adds ? "

    So by this I assume you are happy for any injustice to take place in society - even if it happens to you - and you wouldn't complain about it because you don't believe it adds any value. I genuinely hope that thiefs do not come and steal any the results of your hard labour............by the way. they HAVE but you don't appear to have noticed yet.

    "You say you are happy to let it go bust... What happens to all that Public Money that was pumped in ? Are you happy then to write that off forever ?"

    It should not have been pumped in in the first place. Do you beleive we should pump in another it when it happens again?

  • Comment number 100.

    Although I see the reasoning behind paying bonuses, to keep thiuer top staff, I don't agree with it. I'm sure many of the bankers who were paid bonuses were not the ones to blame for loses of RBS, but I think they should all not recieve bonuses to show that taking unnecessary risks (no large risks at all) is not acceptable. Also, when a business is losing money, I don't see the reason to have high expenditure.

    My view is that until RBS is making a resonable profit again and is in a position to justify paying bonuses, the staff should not be allowed to leave unless it is for personal reasons or a wish for a change of career, not to move onto another banking job. When bonuses are paid again, then this ban could be lifted.

    As for the "£1 billion" the bankers who left could have made, how much would thier bonuses have cost?

    Overall though, I don't agree with the bonus system. Yes, I agree people should be rewarded for extra, exceptional work, but I don't know of many other industries that give bonuses (I'm sure there are quite a few). The finance indutry does seem to live in its own little world though, and in the case of RBS, 84% owned by the taxpayer, its simply not acceptable. The government (who represent the taxpayer) with the 84% share should be able to overide any decision and the 'bank' (the remaining 16%) be able to do nothing about it as they own hardly any of the company.

 

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