Renewed pressure on RBS over £1bn bonuses

There was renewed pressure today on Royal Bank of Scotland over its plans to pay out an estimated £1bn in bonuses as the Treasury select committee revealed 23,000 signatures had been collected against the payments.

John McFall, chairman of the committee, told the bankers giving evidence to the committee today that former deputy prime minster John Prescott had handed him the petition against the RBS bonuses.

Prescott, MP for Hull East, organised a Facebook protest over the possible payments from RBS, which is 70% owned by the taxpayer. He stepped up pressure on bosses at the ailing institution at the weekend saying any bonus payments at the bank would be "morally and economically outrageous". His Facebook campaign attempts to ban what he dubbed "raw capitalism".

Stephen Hester, who replaced Sir Fred Goodwin as chief executive of RBS, was asked by the committee this afternoon whether the government should have required the bank to stop bonus payments when it injected £20bn of taxpayer funds into the bank.

Hester said: "This is very difficult territory and it is right that it is a subject of public debate."

He said that any bonuses that would be paid would have to be agreed with UK Financial Investments, the body set up to manage the £37bn of taxpayer funds in the bailed out banks. "We are trying to make sure UKFI are on board," Hester said.

But he admitted that salaries were too high: "I do think banking pay is way too high and I intend to lead that process".

He said he had to decide "how much worse [we can treat our staff] relative to other banks in the world".

He added: "I do not think there should be guaranteed bonuses. I empathise 100% with the public mood and it would give me no joy whatsoever to pay any bonuses to anyone and if that was the responsible thing to do I would recommend that in an heartbeat."

John Varley, chief executive of Barclays, said he "entirely understands" the public's anger towards the banking sector and admitted that pay structures had contributed to that. He said Barclays was reviewing its pay policies and would publish an update with its annual report, likely in the spring.

"It's very clear to me that some aspects of it, not all, some aspects of it in the past have not served either the industry or society well," said Varley.

HSBC is in the process of a "critical review" of payment levels, its head of UK banking Paul Thurston told the committee. It was looking towards no cash payments of bonuses and more deferral and would publish new pay plans with its annual figures due next month.

guardian.co.uk 11 Feb 2009