Big bonuses unacceptable when banks have been bailed out
Financial institutions that take government bailouts may have their pay and bonuses capped the Government has warned.
Business secretary Lord Mandelson said they risked public outcry if they handed out bonuses perceived as “exorbitant” amid a global backlash against executive compensation paid by banks bailed out by public funds.
“They have also got to consider how it looks and how it seems when those mistakes and losses have been made,” he said.
The FT said chancellor Alistair Darling was reluctant to impose further restrictions on bank pay, although he will use the taxpayers’ stake in RBS and Lloyds to exert pressure for restraint.
RBS is later this month expected to pay out tens of millions of pounds in rewards to staff for 2008, in spite of receiving a £20bn injection of government capital last October, as the bonuses are in their contracts.
Labour MPs are warning of a public backlash. John McFall, Labour chairman of the Commons Treasury committee, said: “If there are big bonuses there will be a huge outcry.”
Gordon Brown, prime minister, said any bonuses must not be “rewards for failure” while Lord Mandelson said RBS had to strike a balancing act between keeping its best staff while considering public opinion.
The Times said banks were to rush through bonus payments to beat the clampdown. It quoted George Osborne, the shadow chancellor, as saying: “It would be an insult to struggling taxpayers if the government allowed banks we part-own to pay out big cash bonuses. To increase taxes on people earning £20,000 to pay the bonuses of someone earning £2m is totally unacceptable.”
The Guardian speculated that banks would find a way round the rules.
