We won't tolerate big bonuses, the nation is angry – Lord Myners

Published on Sunday 18 October 2009 21:42

THE government yesterday pledged to stop state-owned banks from handing out huge bonuses as speculation mounts over windfalls for City workers.

City minister Lord Myners said the government could prevent "unjustifiable" pay-outs.

The Financial Services Secretary stressed that the government had the powers to approve the framework within which pay and bonus decisions are 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.

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 per cent owned by the taxpayer, last night moved to deny reports that top investment banking staff are on course for up to 5 million each in bonuses this year.

RBS has already put aside 1.79 billion 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 pay-out and that any estimates 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 10.3 billion for the first nine months of 2009 to cover compensation and benefits for its 31,700 staff globally – an average 325,000 for each employee.

The 46 per cent leap in pay-outs came after it reported third-quarter net earnings soaring to 1.96bn from 519.8 million a year ago. JP Morgan also stunned markets last week with news of a 2.3bn profit.

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 pay-outs.

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.

Liberal Democrat leader Nick Clegg said it would be "outrageous" for bailed-out banks to pay large bonuses and called for institutions to be split up.

Meanwhile, reports yesterday suggested British banks could be hit with a massive tax grab under plans by the Government to secure a return for the taxpayer-funded bailout of the sector.

Proposals, including a windfall tax on profits, were being drawn up in Whitehall, it was reported.