RBS staff hit by shock pay freeze
RBS will announce a pay freeze for up to 27,000 staff this morning, including all of its investment bankers and thousands of other executives, in a move designed to signal to the public and the government that it is embracing austerity.
The nationalised bank will also reveal that the bonus pool in its investment bank has more than halved to some £400m for an average award of £23,000 per banker, a far cry from the awards being given out by rivals. The rest of the bank will divvy up a bonus pool of around the same amount, adding up to around £800m.
Recruiters say they expect many of the investment bank’s most talented staff to leave once the next batch of bonus stock vests – or pays out – later this year.
“You’re going to see a mass-exodus of their best guys,” said one recruiter who headhunts bankers.
Such an exodus would stoke fears that the management’s inability to run the bank on fully commercial terms is damaging its value, making it harder for taxpayers to get back their £45bn in bailout money.
City A.M. recently revealed the depth of investor concern about political interference in the bank’s management: at least half of its top ten private shareholders have complained to UK Financial Investments, the government agency that manages taxpayers’ 83 per cent stake, about the growing political risks associated with owning its stock.
Chief executive Stephen Hester nevertheless tried to make the case for running the bank as a “commercial business” last night to defend paying bonuses. “We are a commercial business and we attract people who are attracted to a commercial business… I had to look all over the world for the best people [to run the bank] because we fired all of the top management team,” he said.
Hester also said that he views the public profile of his position with horror. He told the BBC: “The limelight I hate. I really hate it. I don’t know if I’d have done it if I had my time again. But I’m here and what I care about is can RBS succeed. I’m gritting my teeth about the rest and pushing on with that.”
He defended the job cuts he is implementing: “One of the least pleasant things I have to do is making cost-savings that come from job losses. If we don’t do it we can’t save RBS and safeguard the jobs that are left.”