The UK Government has been in dispute this week with the board of Royal Bank of Scotland over their proposal to pay their Investment Banking staff bonuses worth an average of £85,000. This is third higher than last year and is based on profits made of about £6 billion. The RBS board have threatend to resign if they are unable to pay the bonuses.
The goverment is reacting to publicity in the newspapers and television that angry voters are complaining about meeting the cost of large bonuses to bankers who they feel caused the financial crisis and triggered a recession.
The compromise has been suggested by Sir George Mathewson a former RBS chairman. He said: I would hope that commonsense prevails and a solution is found that avoids destroying the value in the business for the taxpayer. The 70%government/ taxpayer stake in the bank cost £45 billion. Sir George is urging the government to allow RBS to pay the bonuses for the future good of the business.
RBS are saying that if they are unable to pay planned bonuses to investment banking staff they will lose many of them to rival banks. They are said to be raising investment banking basic pay by up to 150 per cent to escape the Government’s restrictions on bonuses.
The question then is who is right here? In the opinion of the MoneyTalks team we agree with the bank’s view that their staff must be paid their bonuses rather than risk losing the best high flyers to their competitors. Why? Because for UK taxpayers who own 70% of RBS the better the bank performs, the more of the money used to bailout the company will be repaid. Something which we should all want to see irrespective of whether or not you like the idea of RBS bankers being rewarded.
As always let the team here at Loans2you know what you think.
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