The RBS Bonus Row

The row over the proposed bonus payments for RBS executives and management doesn't look like it's going to go away anytime soon.

RBS, the taxpayer owned (70%) wreck of a once fine bank, wants to pay its senior staff £1.5BN in bonuses this year (they are expecting to make £6BN in profits this year).

The government, playing to the gallery, has insisted that it has a say in how much should be paid and have threatened to veto it. The board, not unreasonably, point out that it is for them to make that judgement and have threatened to resign.

As ever with Brown and his lackeys, whatever they touch simply turns to shit. However, this is not the end of this farce.

Lord Mandelson, the Business Secretary, has come out on the side of the board.

He is quoted in The Times:

"I understand the point of view that RBS directors are expressing. They have to remain competitive in the market in recruiting senior executives.

That is why it's important that all the banks are equally restrained and RBS is not singled out, but nobody is suggesting that that will happen."

In other words, don't shoot yourself in the foot just to play to the gallery.

The trouble is, Brown loves to play to the gallery.

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Snouts In The Trough

It would seem that it is not just bankers and politicians who can't resist putting their snouts into the trough, seemingly the ex directors of MG Rover could not resist taking a dip either.

A report into the collapse of MG Rover, which cost 6,500 people their jobs, stated that the four directors (aka "The Phoenix Four") and CEO (Kevin Howe) awarded themselves "unreasonably large" payouts.

Their self indulgent largess "earned" them pay and pensions worth £42M which, needless to say, was "out of all proportion".

The Phoenix Four and CEO have reacted by calling the report a "witchhunt" and a "whitewash for the government".

Quote:

"Our remuneration was not the reason for the collapse. The real reason is the government bungled the last chance to save MG Rover."

That may well be the case. However, the size of the remuneration (given that the company did collapse, and that it was beyond the norm in the industry and the mens' previous lives) is clearly beyond what was deserved.

Lord Mandelson criticised the men for not showing "an ounce of humility".

The 830-page report took four years to produce and cost about £16M. It does not contain much in the way of criticism directed at the government.

The directors would do well to remember that their excessive rewards may have been justified had the business succeeded, but were most certainly not justified in the face of failure.

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Who's In Charge?

Those of you who were worried about who is exactly is in charge of the UK need worry no more, Lord Mandelson has revealed that he is in charge and the person where the "buck stops".

In an interview with The Today programme he said:

"The spending period currently operating in Government stretches beyond the next election and therefore it is reasonable to review public spending at that time."

Adding that the Chancellor has already "made that judgment".

By making that statement in public, he has tied both the Chancellor's and the Prime Minister's hands.

Now all we need to know is who exactly is in charge of the Tripartite regulatory system; the Bank of England, the FSA or the Treasury?

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Pigs At The Trough

The management of the Royal Bank of Scotland, bailed out by the taxpayer to the tune of £20BN, isn't going to allow anything as inconvenient as gross incompetence (it is expected to announce a loss of £7BN-£8BN for 2008) to get in the way of its bonus payments.

The Times reports that RBS is planning to pay large bonuses to thousands of its City traders and senior bankers. Some of the payments are expected to reach tens of millions of pounds, with some bankers in line for six-figure payouts.

It seems that the culture of arrogance is alive and well at RBS, despite the fact that the management should hang their heads in shame for destroying one of Britain's leading banks.

Lord Mandelson, Business Secretary, put it rather more diplomatically then myself (however, it is clear that he is not best pleased):

"What I would say is please be mindful about how this looks and what public opinion will be.

Obviously you have to work in a market where you have got to recruit the best people, keep the best people in place and motivate them.

But they have also got to consider how it looks and how it seems when those mistakes and losses have been made."

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Window Dressing

Mervyn Davies, the chairman of Standard Chartered, has been appointed Trade Promotion and Investment Minister under Lord Mandelson to help to turn around the banking sector.

Davies will step down from Standard Chartered and work for no pay, doubtless a gong will be in the offing if he succeeds.

The government is also offering £20BN of loan guarantees for banks to lend to small/medium sized businesses.

As to whether this is mere window dressing, remains a moot point.

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Mandy Piles on The Pressure

Lord Mandelson, Business Secretary, has put pressure on the banks today, by warning them that their customers will not be best pleased if the interest rate cuts are not passed on.

This warning comes after David Hodgkinson, chief operating officer of HSBC (who travelled with Gordon Brown to the Gulf), warned consumers they might not see any benefits if the Bank of England cuts interest rates this week.

Lord Mandelson, who is also in the Gulf, is quoted in The Times:

"I have to say when official rates are being cut it's not unreasonable for the customers to expect to see some benefits.

People want to feel the benefits of that action. And if it appears the banks are standing in the way of what the government is doing then I think many banking customers are going to be asking difficult questions of the banks.

I must say one of the things that has struck me going round the Gulf is the extent to which our own British PM is now being looked to as someone who will lead the rest of the world out of this mess.

If we can't even have a response in our own country to his moves, to his decisiveness, that will come as a surprise to many."

When Libor comes down so will interest rates charged by banks to customers, that is the key.

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