Cameron warns RBS over investment banking bonus payouts
Thursday, 10 November 2011 09:53
David Cameron has warned the Royal Bank of Scotland (RBS) that the government will “make its views known” if the bank makes bonus payments to its investment bankers.
RBS is 83 per cent owned by the UK taxpayer and in the run up to the banking industries bonus season in February, any indication that banks, especially those part-owned by the UK taxpayer, will be paying bonuses is likely to be controversial.
RBS is reported to have set aside nearly £2 billion for salaries and bonuses to staff within its global banking and markets division. This is seven per cent less than last year but is based on a 20 per cent fall in revenue.
It has been reported that the bank will set aside £500 million in bonuses. This compares with a figure of £950 million last year.
The figure of £2 billion has been allocated from profits within the bank in the first two quarters of 2011. No additional funds went into the pot in the third quarter and some of the fund could be re-allocated or withdrawn depending on the bank’s results in the final three months of the year.
Mr Cameron said: “The British government has a seriously large shareholding in RBS and will let its views be known.”
RBS, like most global banks, is struggling to make money in its investment decision because of the fragility and weakness of the global stock markets and a sharp decline in global sales. Recent figures reveal that globally during the third quarter of 2011 for every £100 earned through investment banking, £93 of it is spent on fixed costs. This is before any provision for bonuses and reinforces the view that this sector of RBS is not providing the taxpayer with value for money.
Meanwhile, the Treasury reported that the combined lending to UK companies in the first nine months of 2011 by RBS, HSBC, Barclays, Lloyds and Santander reached £158 billion, 11 per cent ahead of the agreed target. However, lending to small and medium-sized businesses (SME’s) was still £1 billion below the target.
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