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.

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

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'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, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +82

    Comment number 27.

    If these nasty little rogues got jailed for very long terms if (when) they were caught defrauding the public, laundering money, breaking sanctions, rigging interest rates etc then I wouldn't have such a problem with their ridiculously high salaries and fat bonuses. It's the "all reward, no penalty" ethos that really sickens me.

  • rate this
    +53

    Comment number 17.

    Like many people in Britain I am sick to death of hearing about bankers bonuses talent moving away & the platitudes offered by a toothless regulator no matter what it is called.
    This country has suffered the worst fall in its standard of living ever as a result of bankers. I want govt to bring them to book over their rampant greed & illegal practices.
    I am fed up with the hand wringing excuses.

  • rate this
    +52

    Comment number 40.

    I don't give a toss what bankers are paid in wages or bonuses, just like with any other business. What I do object to is my dosh being used to bail them out when they should be left to go to the wall, just like with any other business.

  • rate this
    +52

    Comment number 103.

    "88. Fras
    Let's stop calling these banksters "talented". They got us into this enormous mess....."

    Bankers destroyed the economy on a global scale with their irresponsible and sometimes illegal behaviour.

    They still take huge risks with other peoples money and are rewarded for success yet not penalised for failure.

    And they still claim huge bonuses.

    If that isn't talented, what is?

  • rate this
    +48

    Comment number 80.

    72. Divots
    'You've allowed you envy to blur your image of bankers to the 1% of the industry Labour like to portray it as. 99% of bank staff live & work locally not globe-trotting, devouring cocaine & champagne. '

    I think you'll find that most people can differentiate between the bankers who get massive bonuses and the bank workers who serve behind the counter in the local branch.

 

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