RBS bankers resign over forced bonus cuts
Two of Royal Bank of Scotland's most senior bankers have resigned amid frustration over the state-backed lender's bonus policy, raising fears about the Government's chances of selling off its stake at a profit.
By Jonathan Sibun, Assistant City Editor
Published: 12:01AM GMT 15 Feb 2010
The Government owns more than 80pc of RBS
Steve Ashley, who heads up RBS's lucrative rates trading division, and Chris Fleming, a senior salesman, quit the bank on Friday last week in a move that shocked RBS investment banking staff. The trading business is believed to have been one of RBS's most profitable divisions in 2009.
Mr Ashley and Mr Fleming are thought to have been offered jobs elsewhere but their decision to leave is believed to stem, at least in part, from dissatisfaction that RBS is being forced to scale back bonuses in the wake of the taxpayer-funded bailout of the bank.
One trader at RBS said: "This is a disaster. The Government has got to make a decision – either it ignores the noise around bonuses, lets the bank pay up and ultimately generates a return for the taxpayer or it stamps down, our best people leave and the taxpayer loses out."
Stephen Hester, RBS's chief executive, has warned of an exodus of talent if RBS is forced to scale back bonuses too aggressively. Last month he told the Treasury Select Committee that RBS is a "prisoner of the market" as he described the bank's policy as paying "the minimum we can get away with".
"Shareholders have raised concerns about our ability to keep and motivate good people," he said, calling staffing his "single greatest problem".
His comments echo those of John Kingman, the outgoing chief executive of UKFI, who told the committee in November that the Government was "walking a tightrope" on bank bonuses.
Mr Kingman warned: "We cannot afford to be in a position where the banks lose so many people that we start to lose serious value."
RBS is still finalising the size of its bonus pool, likely to be around £1.5bn, but Mr Ashley would have a good idea of its likely size. Bonuses will be announced later this month.
One source said: "By the time bonuses are paid it will be 27 months since bankers last received a payout. Cash bonuses were paid in March 2008 and they were only paid in subordinated debt last year. That's a long time to wait."
RBS's bonuses this year will be paid two-thirds in deferred shares. Mr Ashley and Mr Fleming are likely to have been offered guaranteed bonuses and a buyout of their RBS compensation schemes to move. An RBS spokesman confirmed the resignations.
Gordon Brown, the prime minister, pledged yesterday that "every last penny of taxpayer support to British banks is paid back". The Government owns more than 80pc of RBS.
"I'm sure you share my anger with some of the banks," Brown said. "It is only fair that those who have contributed to the recession and have now benefited from taxpayers' support give something to society in return."
News of the departures comes as Lloyds Banking Group has played down reports that chief executive Eric Daniels is in line for a bonus of £10m. "No decisions have been taken," a spokesman said. Mr Daniels' potential maximum compensation for 2009 is just over £6m.
Two of Royal Bank of Scotland's most senior bankers have resigned amid frustration over the state-backed lender's bonus policy, raising fears about the Government's chances of selling off its stake at a profit.
By Jonathan Sibun, Assistant City Editor
Published: 12:01AM GMT 15 Feb 2010
The Government owns more than 80pc of RBS
Steve Ashley, who heads up RBS's lucrative rates trading division, and Chris Fleming, a senior salesman, quit the bank on Friday last week in a move that shocked RBS investment banking staff. The trading business is believed to have been one of RBS's most profitable divisions in 2009.
Mr Ashley and Mr Fleming are thought to have been offered jobs elsewhere but their decision to leave is believed to stem, at least in part, from dissatisfaction that RBS is being forced to scale back bonuses in the wake of the taxpayer-funded bailout of the bank.
One trader at RBS said: "This is a disaster. The Government has got to make a decision – either it ignores the noise around bonuses, lets the bank pay up and ultimately generates a return for the taxpayer or it stamps down, our best people leave and the taxpayer loses out."
Stephen Hester, RBS's chief executive, has warned of an exodus of talent if RBS is forced to scale back bonuses too aggressively. Last month he told the Treasury Select Committee that RBS is a "prisoner of the market" as he described the bank's policy as paying "the minimum we can get away with".
"Shareholders have raised concerns about our ability to keep and motivate good people," he said, calling staffing his "single greatest problem".
His comments echo those of John Kingman, the outgoing chief executive of UKFI, who told the committee in November that the Government was "walking a tightrope" on bank bonuses.
Mr Kingman warned: "We cannot afford to be in a position where the banks lose so many people that we start to lose serious value."
RBS is still finalising the size of its bonus pool, likely to be around £1.5bn, but Mr Ashley would have a good idea of its likely size. Bonuses will be announced later this month.
One source said: "By the time bonuses are paid it will be 27 months since bankers last received a payout. Cash bonuses were paid in March 2008 and they were only paid in subordinated debt last year. That's a long time to wait."
RBS's bonuses this year will be paid two-thirds in deferred shares. Mr Ashley and Mr Fleming are likely to have been offered guaranteed bonuses and a buyout of their RBS compensation schemes to move. An RBS spokesman confirmed the resignations.
Gordon Brown, the prime minister, pledged yesterday that "every last penny of taxpayer support to British banks is paid back". The Government owns more than 80pc of RBS.
"I'm sure you share my anger with some of the banks," Brown said. "It is only fair that those who have contributed to the recession and have now benefited from taxpayers' support give something to society in return."
News of the departures comes as Lloyds Banking Group has played down reports that chief executive Eric Daniels is in line for a bonus of £10m. "No decisions have been taken," a spokesman said. Mr Daniels' potential maximum compensation for 2009 is just over £6m.
