Bankers' pay leapt into British political focus ahead of the annual
financial sector bonus season, when the opposition Labour party
called on the government to block any attempt by RBS to pay its top
staff bonuses worth twice their salary.
The Conservative-led government stopped short of agreeing to that,
saying it had yet to receive any proposal from RBS.
But, in an effort to show his government is taking a hard line on
excessive pay, Cameron promised that the government would use its
veto power as an 81-percent shareholder in RBS to block any rise in
the overall pay pot at RBS's investment bank.
"If there are any proposals to increase the overall pay, that is pay
and bonus bill at RBS, at the investment bank ... we will veto it,"
Cameron told parliament.
RBS had been expected to join rivals, such as Barclays <BARC.L> and
HSBC <HSBA.L>, in seeking shareholder approval to pay bonuses twice
the size of salaries. A European Union bonus cap lets banks double
bonuses if they win shareholder backing.
Hoping to cash in on Britons' dim view of bankers, Labour argued
that the government should not allow the heavily loss-making bank to
bypass the EU cap at a time when ordinary families' living standards
are being squeezed by stagnant pay.
Labour finance spokesman Chris Leslie called Cameron's veto on total
pay "a complete red herring", highlighting that with RBS shedding
staff, it provided little restraint.
The furor will hamper efforts by new RBS boss Ross McEwan to steer
calmly through the bonus season. McEwan waived his annual bonus
following public anger over the pay of his predecessor Stephen
Britain's finance minister George Osborne and many banks in London
oppose the EU curbs, arguing they will force up fixed salaries and
could drive important staff to rival institutions.
Bank of England Governor Mark Carney also told Britain's Treasury
Select Committee on Wednesday that he agreed that a bonus cap was
not the best way to control bankers' pay.
RBS, rescued by a 45 billion pound ($74 billion) government bailout
during the 2008 financial crisis, said that no decisions had yet
been taken on pay and conversations were continuing with
shareholders. The Treasury declined to comment.
[to top of second column]
LABOUR BANK REFORMS
Ahead of a 2015 election Labour's proposal formed the first part of
a renewed push to convince voters the party had learnt the lessons
of the financial crisis which occurred during their time in power.
Labour has around a 5 percentage point overall lead over the
Conservatives in opinion polls, but the public's view of its
economic management skills lags that of Cameron's party.
Labour leader Ed Miliband is expected to unveil proposals to force
Britain's biggest banks to sell branches in a keynote speech on
Friday, although party sources would not give any further details of
Speaking to The Times newspaper, RBS chairman Philip Hampton said
any forced disposals of branches would be "incredibly expensive",
citing the difficulties the bank has experienced selling 315
branches that it was ordered to offload by the European Commission.
"That's already taken us four years and there is still a year or two
to go. We've paid a billion quid <in separation costs>. It's
incredibly expensive," he said.
RBS has shrunk its investment bank since 2008, meaning it has fewer
staff than competitors who could be in line for big bonuses.
However, it still paid out more than 600 million pounds in bonuses
last year, including payouts of more than a million pounds to 93
The bank had 368 so-called 'code staff', or those in risk-taking
positions, in 2012, earning an average of 700,000 pounds. Their
bonus was on average 1.3 times their fixed pay.
RBS made a pretax loss of 634 million pounds in the third quarter of
2013, although that was down from a 1.4 billion loss a year ago.
(Editing by Andrew Osborn and Louise
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