RBS – we need bonuses – we need them now

RBS courtesy of http://oyalbankofscotland.com

RBS courtesy oyalbankofscotland.com

The RBS Board appear to have learnt nothing and are keen to review their perks once again.

In early May RBS reported a loss of £895 million for the first quarter, which compares to a profit of £245 million a year earlier.

Last year the bank managed a loss of £24.1 billion and has an estimated £325 billion of exposed potential uncovered debt, more prosaically termed toxic debt so it doesn’t sound quite so dire. This is being transferred to yet another tax payer bailout, with RBS being liable for £19.5 billion of the debt and paying an insurance premium for £6.5 billion for the risk, bearing in mind the tax payers own 70% of RBS, we the tax payer are in effect paying another set of bureaucrats to insure against a risk, we the tax payer are already covering, money for old rope if you can find a spot in the Quango.

This is the Bank that managed to pay off their former Chief Executive Sir Fred Goodwin a pension amounting to £16 million and is set to pay Gordon Pell, the last remaining executive still on the board from the Goodwin era, a pension worth £9.8 million, when he retires next year.

Looking forward

But it all gets better for the future of RBS Executives though sadly, not for the tax payers who bailed out the bank.

The tax payers will be injecting another £13 billion in to RBS, in addition to the £20 billion already paid to strengthen the balance sheet, with a further £6 billion on stand by.

The Bank is undertaking a restructure and there are resulting board changes.

Stephen Hester CEO RBS

Stephen Hester CEO RBS

In essence the suggestion by Stephen Hester, Chief Executive is that the bank would be separated into two arms, with the bank’s riskier assets and operations grouped together.

Without going in to the finer details, the headlines are:

Gordon Pell, head of Retail Banking is being replaced by Brian Hartzer, from ANZ. Mr Hartzer, who is not an Executive Board Member, so his remuneration package has not been disclosed, is expected to be paid a £3 million pound handshake,

Chris Sullivan, currently head of the bank’s insurance business, is going to head up Corporate Banking, taking over from Alan Dickinson, who is being moved to Chairman Corporate Banking until he retires next year. His pay off is unknown as he is not a Board Executive.

Brian Stevenson, who runs the group’s global transaction services division will report to Mr Sullivan.

Nathan Bostock will join the lender from Abbey National on June 1 as its news head of risk and restructuring.

Paul Geddes, who currently runs UK retail and reports to Mr Pell, will run the insurance division and become a member of the executive board.

Guy Whittaker, the finance director, is being replaced by October and it is expected he will receive a share award.

It has come to light that several senior bankers at RBS are being paid guaranteed bonuses, this flies in the face of Government Policy and any morally acceptable position. The current FSA rules at present clearly state that the bank must be able to claw back bonuses in the event of poor performance and there must be no rewards for failure. A guaranteed bonus cannot be clawed back.

The argument, few months on from the supposed ‘change of culture’ and wringing of hands of course being, that the best people need to be retained and incentivised, so these rules which sounded good when the situation was daily news, just shouldn’t apply now as we can probably get away with it, as the focus is on MP sleaze and upcoming elections.

I just wonder how many people could do worse than a £895 million loss for the first quarter and if this is the best, are the ‘best’ worth the money?

This becomes more apposite when Stephen Hester said of the results and the likely time scale of RBS returning to profit:

‘…It’s not really in our hands, it’s in the hands of the economy and what it does to our loan books,…’

If it isn’t in the hands of the Executives and it is all down to a bit of luck and wind in the right direction, why pay the executives anything?

Philip Hampron Chairman RBS

Philip Hampton Chairman RBS

But it gets better yet; please step forward Sir Philip Hampton, the Chairman of RBS. It transpires he is in talks with the Government about a new incentive scheme for Executive Bonuses, which are expected to net senior staff awards running into millions of pounds. Once again the argument being, this is how the best people will be recruited and retained. The best people to run a business that is: ‘not really in our hands’.

The proposals focus on how these poor beleaguered bankers can be awarded a bonus when the market is so volatile, with the suggestion being there should be some complex measurement of performance against banking sector peers and FTSE 100 companies. Hardly a fair measure, when this is a business that can’t fail, whilst most of the other businesses in the FTSE 100 do not have Government subsidies running to the tune of £ billions and are in sectors or markets which can fail.

These negotiations will only cover this financial period, the period in which the prospects are ‘not really in our hands’ as the FSA are looking at a new set of rules for the coming future.

RBS has learnt nothing and the moral decay continues.

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2 Responses “RBS – we need bonuses – we need them now”

  1. KrisBelucci says:

    I really liked this post. Can I copy it to my site? Thank you in advance.

  2. anarchyintheuk says:

    sent you an email Kris, thanks for taking time to read the article

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