Should the Treasury approve big banker bonuses?

 
RBS logo on store

If it's January, it's time for the traditional disclosure that hundreds of bankers in London are earning considerably more than £1m each, prompting outrage from Labour and embarrassment on the part of the government.

The dance has been more-or-less the same every year since the Crash of 2008.

And although pay levels for bankers have fallen a bit since then, and more remuneration is deferred and capable of being cancelled if deals go bad, the sums shelled out still look enormous at a time when earnings for the vast majority of households continue to be squeezed.

There is however an awkward twist for the government this year. Which is that new European Union rules mean that if banks want to pay bonuses greater than 100% of salary, they have to get the approval of shareholders - and in the case of semi-nationalised Lloyds and RBS (in particular) that would require a "yes" from the Treasury.

To labour the point, the government, as 80% shareholder in RBS, would have to formally approve any desire by RBS to pay 200% bonuses to its top people.

Start Quote

Labour, of course, sees what looks like a wide open, undefended goal”

End Quote
'Consulting'

So, does RBS want to do this?

Well, the huge bank is "consulting its shareholders about this" but insists that it has made no formal request.

As for the Treasury, it too says that RBS "has not made a request".

And the Treasury also points out that it is challenging the EU cap on bonuses in court, because it agrees with the head of the Prudential Regulation Authority, Andrew Bailey, that any limit on bonuses will "just increase base pay, reduce claw back [the ability to get money back for poor performance] and undermine financial stability".

Or to remind you what you already know, for bankers big pay is as natural as cold weather in January. And if they don't get it in the form of enormous bonuses, they'll take it in higher salaries - or move to Switzerland, New York or Singapore.

Exodus

Some might say good riddance. But owners of banks that cannot move their branches to Switzerland, New York or Singapore might fear that the value of what's left would be depleted.

Labour, of course, sees what looks like a wide open, undefended goal, and is calling on the government not to sanction big bonuses at RBS.

Whether Labour would take precisely the same view if it were in government and was the RBS shareholder, and if it was advised that not to pay the market rate would lead to the exodus of whatever talent is still at this political football of a bank, well that is the kind of hypothetical question that could make us all go blind, if we thought about it too much.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

Which budget will matter?

As and when decisions on income taxes, welfare and public spending are devolved to the nations, will the budgets for England, Scotland, Wales and Northern Ireland become more important than the UK's famous budget?

Read full article

More on This Story

More from Robert

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +1

    Comment number 704.

    698. Paul C - "I cannot understand why people feel that they are entitled to a bonus just for doing their job....a bonus should be awarded for exceeding expectations as opposed to falling short of them."

    People feel they are 'entitled' because its in their contract of employment. How some bonuses are geared is the real problem, they rewarded short-termism & possibly poor/average performance.

  • rate this
    +3

    Comment number 703.

    701.MarkH2012
    "Decent directors actually earn less than their employees ..do not help themselves to bonuses or huge expense accounts but instead look at expenditure with a view to keeping business open and also keeping staff trained and employed GOT THE PICTURE HAVE WE !! Thats shut some of you up hasent it !!"
    ==

    Mark,does Nurse know you're on her computer?

  • rate this
    +2

    Comment number 702.

    700.Morris
    ".. if a banker does not like it they should not be in banking as bonuses encourage the wrong culture. Choose another career. I work in a bank, I do not get a bonus. Get rid of them. They could start paying the cleaners of the bank more for a start then!"
    ==
    Careful .. feelings for the poorly paid will get you renamed 'Red Morris'.

  • rate this
    -4

    Comment number 701.

    Decent directors actually earn less than their employees FACT Decent directors when times become hard and challenges difficult do not help themselves to bonuses or huge expense accounts but instead look at expenditure with a view to keeping business open and also keeping staff trained and employed GOT THE PICTURE HAVE WE !! Thats shut some of you up hasent it !!

  • rate this
    +1

    Comment number 700.

    Regardless Alan, there need to be no bonus. Why is there a bonus? abolish it worldwide and you resolve this insane idea of a bonus. A bonus for what? if a banker does not like it they should not be in banking as bonuses encourage the wrong culture. Choose another career. I work in a bank, I do not get a bonus. Get rid of them. They could start paying the cleaners of the bank more for a start then!

  • rate this
    +1

    Comment number 699.

    No

  • rate this
    +1

    Comment number 698.

    I cannot understand why people feel that they are entitled to a bonus just for doing their job. Thats what your salary is for.

    In the case of bankers, I argue that their salary is generous and they have a reputation for letting us down.

    A bonus should (in my humble opinon) be awarded for exceeding expectations as opposed to falling short of them.

  • rate this
    -1

    Comment number 697.

    Finally on this note not a good way to start 2014 Education, training starts at the top that means good bankers who whish to keep banks open don’t help themselves to massive bonuses etc but instead fore go those bonuses to keep A:The investment in the banks self standing B: Their staff employed and C: Command the respect from others leading by example This applies to all business

  • rate this
    0

    Comment number 696.

    We should remember that the vast majority of people who work in banks earn modest salaries.
    It's only a relatively small number of senior managers, and successful traders working in investment banks who earn the big bucks.
    Alan

  • rate this
    +1

    Comment number 695.

    693.MarkH2012
    "Im also stating,"No one is holding you to ransom ", however I can make this extremely embarrassing for some you and what’s more publish some of your endeavors on the net with your organization and messes you leave So before you decide to refer to people as half wits I suggest you place that examination with yourselves ."
    =
    Am sure 685.DeucD will have a puff of what you're puffing!

  • rate this
    -1

    Comment number 694.

    I think all bankers bonuses across the board should be abolished with immediate effect. If this was also done world wide bankers would have no where to scurry off toThis would remove the much used `they would work elsewhere, we need their expertise, we have to pay them. You do not have to pay them, for what, to continue to be rewarded for the current status? I think not. still, nothing will change

  • rate this
    -2

    Comment number 693.

    Im also stating ," No one is holding you to ransom ", however I can make this extremely embarrassing for some you and what’s more publish some of your endeavors on the net with your organization and messes you leave So before you decide to refer to people as half wits I suggest you place that examination with yourselves Every picture tells a story & recorded conversations,written evidance

  • rate this
    +1

    Comment number 692.

    Don't bother stopping their bonuses, just line all the politicians and bankers up against a wall and shoot them all. I'm sure there are many others could be trained up to do their jobs and better. I predicted the last crash. Chaplin predicted the 30s crash but couldn't pursuade his friend Irving Berlin to sell up. the politicians and bankers making excuses for each other make me sick.

  • rate this
    +2

    Comment number 691.

    NO!!! Continue to penalise these greedy, selfish individuals who are only out for personal gain, and care nothing of the misery they have brought to countless thousands of other peoples lives!

  • rate this
    +1

    Comment number 690.

    683.MarkH2012
    "I trust you read my comment Mr ludwigvb Industry requires investment if you think helping yourselves to massive bonuses is good when you are also making people redundant , consider too their families and not just yourselves ..."
    ==
    Think you're shooting at the wrong poster, Mark.

    685.DeucD
    "Could I have a pint of whatever All For All is drinking please?"
    =
    Think you've had enough.

  • rate this
    +1

    Comment number 689.

    Why do people at the top at businesses, often in effect deciding what they should be paid, require a bonus to do their job properly. It doesn't work like that for everyone else. Why are the well paid so greedy? Why should a banker get a bonus the size of the average hard working taxpayers lifetime earnings?

  • rate this
    0

    Comment number 688.

    Having viewed some of your seniority (management , directorship) I'm often surprised at the high level of earnings when colleges considered lesser importance than yourselves , also more knowledgeable do the job better than your selves classified as half wits I have photo's of of their marvelous messes taken deliberately to illustrate this decadent facade of this self importance (Bonuses)

  • rate this
    -3

    Comment number 687.

    17 KURGAN

    'This country has suffered the worst fall in its standard of living ever as a result of bankers'

    Is 'bankers' some euphemism for Gordon Brown and the Labour party?

    If so, jolly good.

  • rate this
    +4

    Comment number 686.

    Perhaps the root question to really ask is "Do you believe that we all woke up one morning in 2008 to find the global financial system on the verge of collapse, and nobody knew?"

    Of course people knew, lots of people knew. Which makes it a planned heist. The appropriation of taxpayers' money to fund private enterprise, on a massive scale.

  • rate this
    0

    Comment number 685.

    Could I have a pint of whatever All For All is drinking please?

 

Page 1 of 36

 

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.