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RBS chief underpaid, says chairman RBS chief underpaid, says chairman
(7 months later)
The chairman of the Royal Bank of Scotland on Monday described the pay of the bailed out bank's chief executive Stephen Hester as "modest", amid fresh scrutiny of bonuses in the wake of the £390m Libor fine.The chairman of the Royal Bank of Scotland on Monday described the pay of the bailed out bank's chief executive Stephen Hester as "modest", amid fresh scrutiny of bonuses in the wake of the £390m Libor fine.
Sir Philip Hampton said Hester – who can get up to £6m a year from bonuses on top of his £1.1m salary – was paid "well below the market rate of people working in banking" because his bonuses had not paid out in full. He was speaking during a lengthy session of the banking standards commission in Westminster, in which a senior RBS colleague admitted the bank had believed Libor rigging was "a mathematical impossibility".Sir Philip Hampton said Hester – who can get up to £6m a year from bonuses on top of his £1.1m salary – was paid "well below the market rate of people working in banking" because his bonuses had not paid out in full. He was speaking during a lengthy session of the banking standards commission in Westminster, in which a senior RBS colleague admitted the bank had believed Libor rigging was "a mathematical impossibility".
The evidence was called after RBS was fined £390m last week for rigging Libor, the interbank lending rate, and announced the departure of the head of its investment bank, John Hourican. Hourican told the commission that he was leaving in order to shoulder "ultimate responsibility" for the manipulation of the benchmark rate.The evidence was called after RBS was fined £390m last week for rigging Libor, the interbank lending rate, and announced the departure of the head of its investment bank, John Hourican. Hourican told the commission that he was leaving in order to shoulder "ultimate responsibility" for the manipulation of the benchmark rate.
Hourican explained the bank had not been focused on Libor in 2008, at the height of the credit crunch, because "when we took control of the bank it had had a cardiac arrest".Hourican explained the bank had not been focused on Libor in 2008, at the height of the credit crunch, because "when we took control of the bank it had had a cardiac arrest".
He added: "We had to prioritise dealing with the existential threat to the bank." He urged those who are staying to change the culture, saying: "I have told people who are prepared to listen that they shouldn't waste my death."He added: "We had to prioritise dealing with the existential threat to the bank." He urged those who are staying to change the culture, saying: "I have told people who are prepared to listen that they shouldn't waste my death."
Hampton, defending bonuses for Hester, conceded the chief executive had a "highly paid job" but that "his pay has been modest relatively". He had received just one bonus since joining in 2008, of £2m, which has yet to be paid out. Some £780,000 of that will pay out in shares next month. Hester defended his pay, saying the nation was now "off the hook" for a lot of "bad things" of the past.Hampton, defending bonuses for Hester, conceded the chief executive had a "highly paid job" but that "his pay has been modest relatively". He had received just one bonus since joining in 2008, of £2m, which has yet to be paid out. Some £780,000 of that will pay out in shares next month. Hester defended his pay, saying the nation was now "off the hook" for a lot of "bad things" of the past.
"My bonus should be assessed on all the things I do well and badly and judgment should be reached in the round," said Hester. Hampton described Hester as having one of the most difficult and demanding jobs in banking. "He has also in his four years been paid well below the market rate for a job in world banking," said Hampton."My bonus should be assessed on all the things I do well and badly and judgment should be reached in the round," said Hester. Hampton described Hester as having one of the most difficult and demanding jobs in banking. "He has also in his four years been paid well below the market rate for a job in world banking," said Hampton.
Evidence was also taken from Johnny Cameron, the former head of RBS's investment bank, who left after the bailout and has agreed with the Financial Services Authority not to hold a senior banking job again.Evidence was also taken from Johnny Cameron, the former head of RBS's investment bank, who left after the bailout and has agreed with the Financial Services Authority not to hold a senior banking job again.
Andrew Tyrie, the conservative MP who chairs the commission, described Hourican "as a human shield" for others including his deputy, Peter Nielsen. Hourican said the bank was better served by Hester and Nielsen remaining in their roles.Andrew Tyrie, the conservative MP who chairs the commission, described Hourican "as a human shield" for others including his deputy, Peter Nielsen. Hourican said the bank was better served by Hester and Nielsen remaining in their roles.
Nielsen admitted that there were problems with the Japanese yen and Swiss franc Libor rates but that leading currencies such as sterling were not affected. "Senior management felt it was almost a mathematical impossibility" to affect Libor, Nielsen said.Nielsen admitted that there were problems with the Japanese yen and Swiss franc Libor rates but that leading currencies such as sterling were not affected. "Senior management felt it was almost a mathematical impossibility" to affect Libor, Nielsen said.
He conceded that the bank had been too slow to respond to concerns about Libor and said the first two years after the bailout had been spent trying to save the bank. The Libor rigging took place between June 2006 and March 2010. Hourican admitted that it was "reprehensible" that Libor rigging had continued after the £45bn taxpayer bailout.He conceded that the bank had been too slow to respond to concerns about Libor and said the first two years after the bailout had been spent trying to save the bank. The Libor rigging took place between June 2006 and March 2010. Hourican admitted that it was "reprehensible" that Libor rigging had continued after the £45bn taxpayer bailout.
Tyrie expressed doubt about the bank's claim that it would recoup £300m of the fine from bonuses.Tyrie expressed doubt about the bank's claim that it would recoup £300m of the fine from bonuses.
"We were not given sufficient confidence today that the arrangement for funding the fines from bonuses will do what it says on the tin," said Tyrie. The commission's chair wants RBS to show what bonuses would have been paid without the fine."We were not given sufficient confidence today that the arrangement for funding the fines from bonuses will do what it says on the tin," said Tyrie. The commission's chair wants RBS to show what bonuses would have been paid without the fine.
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