Finance Matters

Posts Tagged ‘RBS’

David Cameron’s decision to apparently reverse his earlier position and allow the European Union should play a role in bailing out the eurozone has caught him considerable criticism on home turf.

“For the prime minister a veto isn’t for life, it’s just for Christmas,” opposition leader said Wednesday, the Financial Times reports, while the Daily Mail la belled him a “pansy” for reversing his decision.

At best, Cameron was seen as standing aside when the new treaty was signed, rather than vetoing as he had done months back.

So what could have caused Cameron’s embarrassing u-turn?

Gawain Towler, a Eurosceptic blogger and UK Independence Party (UKIP) communications officers, suggests an intriguing theory:

Did the EU kill off the Deutsche Boerse – NYSE merger so that the UK’s prized London Stock Exchange would remain top dog in Europe?

It bears consideration, at very least.

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• Everyone In The UK Is So Mad About The RBS Chief’s Taxpayer-Funded Bonus

Fred Goodwin, the former chief executive of the Royal Bank of Scotland (RBS), has been stripped of his knighthood for his role in the bank’s collapse during the 2008 credit crunch.

The Queen formally approved the annulment of the honour yesterday, after it was decided Mr Goodwin’s award brought the honours system into disrepute.

The decision is unprecedented as honours have formerly only been withdrawn from people convicted of a crime.

Mr Goodwin was knighted in 2004 for services to banking but his actions during the banking crisis are believed to have contributed to the collapse of RBS.

The bank received £45bn of rescue-funding and is now more than 80% owned by the Government.

The Financial Services Authority and Treasury Select Committee believe the banks’ failure was a key factor in financial crisis and the subsequent recession in the UK.

Mr Goodwin oversaw the takeover of Dutch bank ABN Amro in a £49bn deal which took place at the onset of the credit crunch, exposing RBS’s weak balance sheet and precipitating its collapse.

When Mr Goodwin left the bank in November 2008 his £703,000-a-year pension deal, which included a £2.7m lump sum, led to public outrage.

In the event of a future banking crisis, Britain’s finance ministry will be able to take charge after new law reforming the regulation of the country’s financial system takes effect next year.

The legislation will disband the Financial Services Authority from 2013 and give the central bank the power to supervise banks and insurers.

In a speech following the publication of the draft law, Chancellor of the Exchequer George Osborne said: “When taxpayers’ money is at risk in a crisis this legislation gives the Chancellor (of the Exchequer) the power to direct the Bank of England to act.”

Speaking to the BBC after the Royal Bank of Scotland’s chief executive announced his decision to forgo his bonus this year, the government has said that it will not block bonuses to the bank’s other executives.

RBS chief executive Stephen Hester was awarded £963,000 in shares but following pressure from public opinion and MPs he decided to follow the example of Lloyds Banking Group’s chief executive and waive his award.

Lloyds chief António Horta-Osório gave up a bonus which could have been worth £2.4m.

“We are not going to micro-manage bonuses,” a Downing Street spokeswoman said.

Bankers’ bonuses have been coming under increasing scrutiny since the 2007 banking crisis and with most banks expected to record a drop in revenues this year, the bonuses have been perceived as a reward for failure.

Banks’ investment banking operations suffered poor trading last year and multi- billion pound payouts for mis-sold payment protection insurance (PPI) have resulted in lower income which will reduce underlying profits.

Although Downing Street now plans to leave the question of bonuses to RBS’s management, Labour says it will continue to closely monitor the bonuses awarded to senior staff at RBS which is 66 per cent owned by the government.

At a European Parliament hearing in Brussels today, the European Union said it may impose tighter regulations on banks’ bonus payments to staff if they go against “all reason, common sense and morality.”

Michel Barnier, the European Union’s financial-services commissioner, may tighten up laws which govern banks across the EU if excessive bonuses continue to be paid.

One idea under consideration if for the role a bank’s shareholders play in setting pay awards to be strengthened.

Mr Barnier said the European Commission, the executive body of the European Union, will be “extremely vigilant” in monitoring bonuses paid by banks in 2012.

LONDON (AP) — Royal Bank of Scotland chief executive Stephen Hester will not be accepting a 1 million pound ($1.5 million) bonus that drew criticism from British public and politicians, the bank said Sunday.

Spokesman David Gaffney said Hester would not receive the bonus of 3.6 million shares he was awarded last week by the board of the largely state-owned bank.

The British government spent 45 billion pounds bailing out RBS three years ago. It still owns an 82 percent stake, and politicians had criticized the reward at a time when Britons face painful spending cuts and tax hikes.

The government — which has insisted it has no control over the bank’s bonuses — welcomed the announcement.

“This is a sensible and welcome decision that enables Stephen Hester to focus on the very important job he has got to do, namely to get back billions of pounds of taxpayers’ money that was put into RBS,” Treasury chief George Osborne said.

The decision follows Saturday’s announcement that RBS chairman Philip Hampton was waiving his own bonus of 1.4 million pounds in shares.

Hester and Hampton were brought in after Fred Goodwin, who led RBS’s ill-fated takeover of Dutch bank ABN Amro, stepped down in October 2008 as the government was spending billions to prop up the bank.

The board of directors decided last week to award Hester a bonus of 3.6 million shares — worth just under 1 million pounds at Friday’s closing share price of 27.74 pence. That came on top of his annual salary of 1.2 million pounds.

Prime Minister David Cameron said Saturday that Hester’s bonus was “a matter for him,” but pointed out it was much less than last year’s.

The government claimed it had no control over bonuses awarded by the bank, and said replacing Hester if he resigned would be more costly than paying the reward.

But many politicians were critical. London Mayor Boris Johnson, a Conservative like Cameron, said he found the bonus “absolutely bewildering.”

Rachel Reeves, Treasury spokeswoman for the opposition Labour Party, said Sunday the sum was inappropriate “when families are feeling the pinch.”

“It’s time the government explained why they have allowed these bonuses to go through unchallenged,” she said.

Before the bank’s announcement, the Labour Party said it would force a vote in the House of Commons next month calling for Hester to be stripped of his bonus.

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See Also:

• RBS Chairman ‘Declines’ A Bonus He Likely Wouldn’t Have Gotten Anyway
• Morgan Stanley Executive Follows James Gorman’s Advice And ‘Just Leaves’
• REPORT: Credit Suisse Pay For Senior Bankers Cut By 30%

The Guardian, along with other media outlets, is reporting that RBS Chairman Sir Philip Hampton has declined his bonus for 2011. He would have been due $2.2 million (£1.4 million) as part of the compensation package he recieved when he joined the bank in 2009.

However, it is not clear if Hampton would even have been eligible for the award had he been willing to accept it.

As The Guardian reports, Hampton “had not meet the performance criteria attached to [the shares] when he was first awarded them when he joined the bank in 2009.”

A spokesman for the bank further undermined the voluntary nature of the decision with this statement: “Sir Philip Hampton will not receive the 5.17m shares he was awarded in 2009 when he joined RBS.”

You can spin yourself in circles here, but there is a distinct ‘chicken/egg’, ‘you’re fired/you can’t fire me I quit’ quality to the whole story.

Regardless of veracity of Hampton’s attempt to display humility, the move is an indication that RBS is attempting to respond to the controversy surrounding the earlier announcement that CEO Steven Hester would receive a $1.2 million (£963,000) equity bonus for 2011.

However, in moving to rein in their chairman’s bonus, RBS may only increase the pressure on their CEO to decline his on performance-based pay. Public outcry at the payout has been intense and the leader of the opposition Ed Miliband has called on Prime Minister David Cameron to block the bonus at the shareholder meeting in April. The British Government currently owns approximately 67% of RBS.

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See Also:

• Goldman’s Blankfein Receives A $2.69 Million Portion Of His Pre-2011 Equity Pay
• VIDEO: Morgan Stanley’s CEO Says Employees Unhappy With Pay Are Naive And Can Leave If They Can’t Adjust
• Morgan Stanley Executive Follows James Gorman’s Advice And ‘Just Leaves’