Lord Myners vows to veto huge bank bonuses

Oct 19 2009 by Peter McCusker, The Journal

THE Government has pledged to take action to stop State-owned banks from handing out mega bonuses as speculation mounts over bumper windfalls for City workers.

Speaking on the BBC 1’s Andrew Marr Show yesterday, City minister Lord Myners said the Government could prevent “unjustifiable” payouts.

He stressed that the Government had the powers to approve the framework within which pay and bonus decisions were made and would take action if necessary.

His comments come amid a swathe of reports suggesting major banks are lining up hefty bonuses for staff, including part-nationalised Royal Bank of Scotland – one of the biggest recipients of taxpayer bailout cash.

Lord Myners said: “We are simply not going to tolerate high levels of remuneration which are not justified and earned. The nation is angry and I’m angry.”

He added: “We have made it very clear... that bonuses must be justified and that boards of directors must challenge the decisions and if we found that the bonuses policy was an unreasonable source of risk or simply not justified, we would vote against it.”

RBS, which is more than 70% owned by the taxpayer, last night moved to deny reports that top investment banking staff are on course for up to £5m each in bonuses this year.

RBS has already put aside £1.79bn in the first half of 2009 to cover staff expenses, including salaries and bonuses.

A spokesman said no decisions had been made on the full year payout and that any estimations were “without any foundation whatsoever”.

But last week’s bumper start to the US third quarter bank reporting season from JP Morgan and Goldman Sachs fuelled concerns it was “business as usual” less than a year after the financial crisis that tipped the world into recession.

Goldman Sachs revealed it had earmarked US $16.7bn (£10.3bn) for the first nine months of 2009 to cover compensation and benefits for its 31,700 staff globally.

British blue chip bank Barclays is on track to post similarly impressive profit figures, which will trigger multi-million pound bonuses for dozens of investment banking executives, according to reports yesterday.

However, Lord Myners stressed banks had yet to make decisions on the year-end windfalls for staff.

He hopes moves to secure international agreements with the banking industry on recently drawn up G20 pay reforms will stamp out excessive payouts.

Britain’s five major banks have already signed up to the recommendations and 11 overseas banks with UK operations last week pledged their support to the agreement, which seeks so-called claw-back clauses and deferred payments.