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UK government warns bankers “to come back into the real world”

Friday, December 4th 2009 - 05:06 UTC
Full article
Lord Myners is pushing a cut to annual bonuses Lord Myners is pushing a cut to annual bonuses

A British government minister has told bankers “to come back into the real world” after Royal Bank of Scotland directors threatened to resign over bonuses. City Minister Lord Myners said it was unrealistic that bankers should expect to be paid million pound bonuses.

The City Minister has said bankers should not expect “wholly fortuitous” bonuses amid concerns over the size of planned payments at Royal Bank of Scotland.

Lord Myners said the British government stimulus had created a beneficial environment in which financial firms operated, so better performance should not necessarily mean bumper staff rewards.

The UK government has warned it might veto the size of the RBS bonus pool - thought to have increased by 50% on last year to £1.5 billion - prompting reports that the bank's board could resign.

Lord Myners insisted that there had been “no threat” to quit from RBS directors and said negotiations were still in their early stages. But he did urge institutional investors to “stand up and speak publicly” about their views on large bonuses.

He said state interventions had created “very benign conditions” for the banks, reflected in better financial performance, and this could not simply be put down to the individual skills of employees.

“It is far from clear that that should lead to wholly fortuitous payments to senior executives,” he said.

Lord Myners urged banks across the system, including those not supported by the taxpayer, to take into account the “broad public concern” over bonuses. He said that more than 5,000 bankers in the UK industry would earn more than £1 million this year unless action was taken.

He said that the median wage in the UK was just over £20,000 a year, and yet some bankers expected as a matter of course to receive bonuses, in addition to their salaries, of millions of pounds.

As part of the terms of its latest deal to insure bad debts, the Government wants to dictate both the “quantum and shape” of the payouts at RBS for 2009.

The bank, which will be 84% state-owned under the terms of the Asset Protection Scheme (APS), will now have to agree the size of this year's payouts with UK Financial Investments (UKFI), the body set up to manage the public stakes in financial firms.

Categories: Economy, Politics, International.

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