RBS announces £2bn losses but claws back some bonuses

Despite recording a fourth quarter loss of nearly £2bn, state-owned Royal Bank of Scotland has still paid out almost £1bn in bonuses to staff in 2011.

But challenged in an interview Mr Hester has defended his track record and revealed that RBS has reformed the way it pays its staff. Asked about the decision of Lloyds bank to claw back bonuses after having to set aside billions of pounds to cover compensation for the mis-selling of payment protection insurance (PPI), Mr Hester said:

“I believe strongly in the reform of pay that spreads bankers’ pay over several years in a deferred way and then if something goes wrong afterwards allows it to be taken back. We introduced it in 2008 and we use it regularly, and we’ve used it in at least 36 cases this year.”

On Monday, Lloyds bank made public that it would be clawing back £2m from 13 executives involved in the mis-selling of PPI.

We have to clean up the biggest time-bomb of debt ever built on a bank balance sheet. Stephen Hester

Mr Hester said the RBS decision to claw back bonus payments was not related to the selling of PPI, but declined to explain further, saying: “These are private matters between us and individuals, so I’m not going to trumpet it.” He added: “the entire management team that was responsible for RBS when PPI business was done have gone. In the case of Lloyds they stayed rather longer.”

RBS, which is 82 per cent owned by the government after a state bailout during the 2008 credit crisis, reported a fourth-quarter loss of £1.8bn, pushing it back into the red after it made a third-quarter profit of £1.2bn.

The bank said staff costs at its GBM investment banking division, where it is cutting thousands of jobs, were £2.45bn in 2011, down 9 per cent from the previous year.

It paid out £390m in bonuses for its GBM investment bankers for 2011, down 58 per cent from 2010.

Across the bank, RBS paid out £985m in bonuses, down 21 per cent from 2010.

RBS Chairman Philip Hampton and Chief Executive Stephen Hester waived their bonuses earlier this month after politicians from all the major parties called on them to refuse the awards.

In an interview with Channel 4 News, Chief Executive Stephen Hester gave a frank assessment of his progress so far.

“We have to clean up the biggest time-bomb of debt ever built on a bank balance sheet.

“That is a difficult job and in the last thre years we have got rid of £700bn of bad assets – twice the entire size of the Greek national debt.

“That is part of the job that people are being paid to do.”

On bankers’ bonuses, he said trying to run a bank without awarding bonuses “would fail”.

He said: “I had to completely restaff the senior management ranks of RBS.

“If my employment proposition had been ‘Come from your perfectly good exisitng job to RBS, get more grief and get paid less’, shall I tell you how many people would have accepted?

“The answer is none or very close to none.

“But that is not a defence of payment for failure.”

Read more: RBS chief Hester waives £963,000 bonus

What would you ask Hester? 
@thekingidiot Are the RBS staff who are getting millions £ bonuses the same ones that caused crash? Can they believe their luck?
@Ian_Fraser Is Hester at all concerned about behaviour of RBS "distressed assets" arm?
@moveyourmoneyuk Why he allows his bankers to be paid 400m when the bank make a 2bn loss?
@DekHarper How has his own portfolio performed since his appointment as rbs boss?
@katie15price Instead of paying huge sums to bankers who have already got it wrong bring in younger people with fresh ideas?