Cameron urges RBS to show 'restraint' over more bonuses

David Cameron said the arrangements to hire Stephen Hester and pay him a bonus were put in place by the last Labour government

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Prime Minister David Cameron has urged RBS to show "restraint" in the award of other bonuses for senior executives.

Although RBS chief executive Stephen Hester has waived his award of £963,000 in shares, senior colleagues are also in line for bonuses.

Mr Cameron told reporters at the EU summit there had to be a better link between pay and performance.

However, a Downing Street spokeswoman said the government would not block bonuses to other executives.

On Sunday, Mr Hester waived the 3.6 million shares package - his performance bonus for 2010 - after Labour MPs planned to force a Commons vote on the issue.

It came the day after it emerged that RBS chairman Sir Philip Hampton had waived a shares-only bonus worth £1.4m.

Mr Cameron defended the government's role in the RBS bonus affair amid suggestions that it was Labour's threat of a Commons vote that forced Mr Hester's hand.

The prime minister said: "We made our views very clear... What needs to happen is a sense of restraint, and they have got to do a better job to demonstrate how pay is linked to performance."

Mr Cameron said he had made his views known to RBS, but said "voluntary restraint" was needed.

Earlier in the day, a Downing Street spokeswoman told the BBC that there would be no compulsory veto of bonuses.

"We are not going to micro-manage bonuses... They [the bank] are doing a good job and making good progress," she said.

She added it was absolutely essential that the RBS executive team was left in place to sort out its problems.

RBS share price

The spokeswoman added: "The prime minister's view was that he wanted the bonuses to be lower.

"He always made it clear that it was a matter for Mr Hester whether he took that bonus or not, and that should remain the case.

"Reward for good performance is not in itself a bad thing."

'Acknowledging hypocrisy'

Mr Hester was appointed chief executive at the end of 2008 to replace Sir Fred Goodwin, after the bank had to be bailed out by the government, which now owns 82% of it.

David Fleming, national officer for the Unite union, said: "Better late than never will be the feeling amongst the call centre, bank branch and processing staff at RBS, that Stephen Hester has finally bowed to public pressure to waive his nearly £1m bonus.

"This gesture goes some way in acknowledging the hypocrisy of an organisation, which has sacked over 21,000 staff, while still attempting to pay bumper bonuses to the bosses."

Lord Oakeshott, the former Liberal Democrat Treasury spokesman, said: "I'm all in favour of Mr Hester or anyone else earning plenty of money from RBS - if he runs the bank to do what really matters and if he won't lend to small business, as he promised, he shouldn't get any bonus."

Fall in shares

Earlier this month, RBS announced it would cut 3,500 jobs from its global banking division.

The cuts will mean RBS has removed 11,000 employees from its staff, almost halving its 2007, pre-credit crunch headcount of 24,000.

Shares in the bank have fallen 36% in the last year, and were down 4.5% on Monday's open.

The overall bonus pool at RBS's investment banking arm, which will be revealed days before the results on 23 February, is expected to be about half of the £950m of the previous year.

Barclays, which unlike RBS received no direct state help during the credit crunch, is reported to be considering paying its chief executive Bob Diamond up to £10m in the forthcoming bonus season, compared with a total payout of £6.5m in the previous year.

However, no formal announcement has been made.

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