Page last updated at 09:57 GMT, Saturday, 12 September 2009 10:57 UK

Bank boss wary of quick recovery

RBS Chief Executive Stephen Hester talks to Robert Peston

A slow, smooth recovery from recession would be far better than a rapid bounce, Stephen Hester, chief executive of Royal Bank of Scotland, has said.

He told BBC business editor Robert Peston that "a rather gradual emergence from recession" where the economy could "rebalance" was the best way forward.

He warned a "spend-not-save" culture could mean further economic downturn.

Mr Hester was made RBS boss in November 2008, at the same time as the bank had to be rescued by the government.

A 70% stake is now held in RBS by UK taxpayers.

'Lost decade'

Mr Hester told our correspondent he wanted to see a situation "where people can save more, borrow less, the balance of payments deficit closes, the government gets its own deficit under control".

He said the priority for the UK was to reduce the indebtedness of the public sector, households and businesses.

But if we returned to our ways of the boom years, where households and businesses spent but did not save, he warned that the UK could face a "Japanese-style lost decade".

Until we fix the problems that have recently exploded in our face the world is an unstable place and our economy is unstable
RBS chief executive Stephen Hester

That would be a decade "where the economy is highly unstable, or, worst case, we actually have another down period - a so-called W-recession".

However, Mr Hester called it the "democratic dilemma" that "human beings find it extremely hard to deny themselves today in favour of a safer and calmer future".

"So it is entirely possible that we actually enjoy a rather faster recovery, where people are tempted to say: 'That was a bad nightmare behind us, but don't worry it's gone and we can go back to where we were before.'

"I think that might happen. If it does happen it will be dangerous because we won't have fixed the problems that have recently exploded in our face and until we fix them the world is an unstable place and our economy is unstable."

The RBS boss also told our correspondent that his parents, who are academics, believed that "bankers get paid too much".

The full interview with Stephen Hester can be seen on Leading Questions with Robert Peston, at 2030 and 2330 BST on Saturday, 12 September, and 2230 on Sunday, 13 September, on the BBC News Channel.

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