RBS boss denies cutting bonuses will boost business lending

RBS chief executive Stephen Hester hits back at criticism from Robert Jenkins' claim that well-run banks could raise capital from stockmarkets.

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by Victoria Bischoff on Nov 24, 2011 at 09:23

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RBS boss denies cutting bonuses will boost business lending

Cutting bonuses will not help banks increase lending to small businesses, Royal Bank of Scotland (RBS)'s chief executive told MPs yesterday, dismissing Bob Jenkins' recent attack on the banking lobbyists as ‘strange’.

When asked by Andrew Tyrie, chairman of the Treasury Select Committee, if he agreed with Bob Jenkins' claim that the banks could strengthen their balance sheet without reducing lending, Stephen Hester, chief executive of RBS, replied: ‘There were some strange things in what he said.

‘I understand, for example, one suggestion was that we go out and raise some more capital and I’d be very interested to see the investor who wants to put more capital towards UK banks – at the moment they're all thinking that’s a dumb place to put capital,’ he added.

Hester claimed the issue of cutting bonuses was irrelevant to the issue of lending to SMEs (small and medium-sized enterprises) when pushed by Tyrie to say more.

‘It may be an entirely desirable thing to do but it will not have the impact of even a penny more available to small businesses,’ he said. ‘If there are large bonuses in banking – which are a shrinking thing anyway – they are not in that area of the business’.

What’s more, he added, bonuses are paid in equity and therefore don’t cost capital.

In a speech this week Robert Jenkins, former boss of investment group F&C and now a member of the Bank of England's financial policy committee, said banks' attempts to portray regulatory reform as damaging to the economy were 'intellectually dishonest and potenitally damaging'.

Jenkins' outspoken criticism has divided the City. Some banking sources sympathise with Jenkins' view but others resent what they see as a disingenuous, PR stunt from a former fund manager trying to prove his consumer credentials.

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8 comments so far. Why not have your say?

Turkeys insist that Christmas is a Bad Thing in unbiased opinion shocker.

In other news: Pope insists Catholicism is "well good" and bears' press release points out benefits of using forests for ursine toileting needs.

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Redistribution of who receives bonuses would provide stimulus to the economy as a larger amount of monies received would be spent on goods and services rather than squirrelled away. Large amounts are received by the fat cats at the top and the question Stephen Hessler should be answering is how the bonuses are distributed within RBS and how many people on the payroll (both direct and employed by outsourced services) who provide a valuable contribution to the bank benefit from the bonus structure.

The fat cats know the system will inevitably be forced to change and are optimising their position while they can. High earners are maximising their rewards before the inevitable happens - the revolution cannot come soon enough!

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Whatever the hypothesis, you can guarantee that someone with interests in getting bonuses is going to argue that cutting bonuses is not going help.

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The balance sheets could gain £280Million straight away, by paying the 2,800+ bankers in the greater than 1 Million category a reasonable salary of say £100,000 - still far more than they are worth.

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Well, if the bonuses cut by 2/3, then that would be £2-3 billion for lending will give at least £10-15 million extra income and a slight boost to the reduced bonuses and more for the tax man and the shareholders on an annual basis.

And Hester calls himself a banker, no, rather spiv, in it for himself.

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All corporate executives, with snouts firmly in the trough, might not feel so comfortable were a revolution to be started by those without jobs or a prosperous future.

We have seen the recent demonstrations in Egypt and it wouldn't take much for the dienfranchised of this country to decide to take matters into their own hands.

The French Revolution was not so long ago and that was inspired by exactly the same disparities which we are seeing today. ............ So off with their heads !!!!!!!!!

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Fine, but it is not only corporate executives with snouts firmly in the trough. Why do we subsidise the residence of a peer with two homes, for example? ... and why is it that we are unable to remove from their non-jobs, or remove from office, those who have absolutely failed in their public service role ... without a pay-off of half a million?

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Jonathan

Nov 25, 2011 at 11:11

dd,

yes, trying to persuade any fat pig that has their snout firmly embedded in the trough that they really don't need to consume more calories is a task that's not going to succeed.

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