Page last updated at 17:54 GMT, Thursday, 5 February 2009

Brown warns banks on bosses' pay

Gordon Brown: 'A new approach... is required'

The Prime Minister has insisted there should be "no reward for failure" at banks which have had to be bailed out by the taxpayer.

Gordon Brown was speaking after reports Royal Bank of Scotland is considering awarding large bonuses, despite expectations of huge annual losses.

However Mr Brown stopped short of saying the government would impose a salary cap on rescued banks.

On Wednesday President Obama capped executive pay at rescued US banks.

RBS warned

Earlier, Business Secretary Lord Mandelson sent a direct warning to RBS, saying the bank risks alienating ordinary people if it gave its executives "exorbitant" bonuses.

Responding to a report in The Times newspaper saying RBS was planning to pay millions in bonuses to its senior bankers and traders, Lord Mandelson said: "Please be mindful about how this looks and what public opinion will be."

The recently bailed-out bank said its pay policy had yet to be decided.

The banks have got to be sensitive to public opinion and I think they need to think about what is the best way forward
Business Secretary Lord Mandelson

RBS told the BBC: "The Board has yet to decide on remuneration policy for the year."

"We have previously announced that the Board will receive no bonuses in 2008 and if there are any bonuses for 2009 they will be paid in shares."

Lord Mandelson added: "Of course you have got to do all you can to recruit the best people and keep the best people in place - there is a huge job on our plates.

"On the other hand the banks have got to be sensitive to public opinion and I think they need to think about what is the best way forward."

No reward

Speaking later at Downing Street, the Prime Minister was keen to stress that top executives at rescued banks had left without severance pay and bonuses.

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If the bank executives can't manage their own finances what are they doing running banks?
Andrew Lefevre, Norwich

The new boards would not be receiving any cash bonuses and there would be no dividends for shareholders, he added.

Mr Brown also said he "strongly agreed" with the approach to executive pay being taken by President Obama.

The PM was speaking one day after the US President announced a $500,000 (355,000) limit on executive pay at US firms that needed fresh government aid.

Wall Street paid $18.4bn (12.7bn) in bonuses in 2008 and $32.9bn (22.7bn) in 2007.

However Mr Brown stopped short of saying the government would impose a similar salary cap.

Record loss expected

RBS, which is set to be 70% owned by the government, is due to release its annual earnings results on 26 February.

It has already said that it expects to report write-downs of between 7bn and 8bn in 2008. The forecast caused shares in the bank to plunge 67%.

Analysts predict it will report a record annual loss for 2008, beating the 15bn loss posted by Vodafone in 2006.

According to The Times newspaper, RBS paid out 1.83bn in remuneration in 2007, most of which is thought to have been in bonuses.



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SEE ALSO
RBS boosts business lending funds
05 Feb 09 |  Business
Royal bank chair steps down early
03 Feb 09 |  Scotland
RBS shares plunge on record loss
19 Jan 09 |  Business
History: Royal Bank of Scotland
04 Nov 08 |  Scotland



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