Axe falls in RBS boardroom bloodbath

Critics said the latest RBS boardroom shake-out – following the ignominious departure of chief executive Sir Fred Goodwin and chairman Sir Tom McKillop – was necessary to restore confidence in the bank.

They said that the non-executives, including Peter Sutherland, also chairman of BP and Goldman Sachs, and senior independent director Bob Scott, had been supine in the face of Sir Fred's fierce acquisition strategy.

That strategy – including the acquisition of a major slice of ABN Amro for 10 billion as the credit crunch was breaking in 2007 – has been partly blamed for the 28 billion of losses RBS is shortly to announce for 2008.

Richard Hargreaves, head of equities at broker Hargreaves Lansdown, said: "It will improve City sentiment towards RBS. It will look like it is out with the old and in with the new, that the new brooms are sweeping."

Simon Willis, banking expert at NCB Brokers, said: "The slimmed-down board is good. It is not hugely significant, but not irrelevant, as the strategy is being driven by the top management team."

Vince Cable, the Liberal Democrat shadow Treasury spokesman, described the move as "totally justified and overdue".

"It's absolutely right that non-executives who oversaw the destruction in the bank and were partly responsible for the conduct of 'Fred the Shred' and his (executive] colleagues should share that (blame]. They should have gone sooner," he said.

Apart from Sutherland and Scott, RBS said yesterday the other five non-executives to go were Jim Currie, Bill Friedrich, Bud Koch, Janis Kong and Sir Steve Robson.

An RBS spokesman confirmed they would receive no pay-offs. Their annual salary was 72,500.

Roger Lawson, director of the United Kingdom Shareholders Association, the leading organisation for private shareholders, said the cull of non-executives at RBS was right.

Mr Lawson added: "It's deserved that they should walk the plank. They did not control the executive at the bank.

"It is not an issue of competence. I'm not saying the non-executives are totally to blame. But it is right that they set an example by going."

The five non-executives to survive the bloodletting are Colin Buchan, Archie Hunter, Joe MacHale, John McFarlane and Art Ryan. RBS is expected to announce three new non-executives for the board, who will be endorsed by the government via its UK Financial Investments agency. Sources say that announcement could come as early as next week.

The coup at the helm of RBS is understood to have been orchestrated by new chairman Sir Philip Hampton, who only took over from Sir Tom McKillop earlier this week.

The move will be seen as an attempt by Sir Philip and new chief executive Stephen Hester to draw a line under strong criticism for the lack of oversight on the RBS board as it crashed to record losses for a UK company.

Sir Philip, a former chairman of UKFI, said yesterday: "We are making good and purposeful progress in the restructuring of the group, including the board."

As well as the managerial changes, RBS this week pulled talks that could have led to the sale of its insurance division, which includes flagships Direct Line and Churchill, as well as Green Flag and Privilege.

Mr Hester earlier this year sold the Bank of China stake acquired by Sir Fred.

Sir Philip is known to have discussed the proposed clear-out with UKFI, the body that monitors the taxpayers' investments in banks, earlier this week.

Sources say UKFI is supportive of the action at the bank, where the government will soon own 70 per cent, because it will make it more "focused".

Analysis - Bankers face criticism over pay rewards

THE bankers' bonuses row reignited yesterday as politicians criticised a rush by thousands of senior bankers and City traders to pocket bonuses before any government crackdown.

It follows strong indications that Royal Bank of Scotland, soon to be 70 per cent owned by the government, Lloyds Banking Group, 43 per cent owned by the taxpayer, and Barclays, which has accepted billions of pounds in Bank of England loans, will all award payouts for 2008.

They have defended the move by saying the bonuses will be lower than previous years because of bad market conditions.

But George Osborne, the shadow chancellor, hit back yesterday, saying: "It would be an insult to struggling taxpayers if the government allowed banks we part-own to pay out big cash bonuses. "To increase taxes on people earning 20,000 to pay the bonuses of someone earning 2 million is totally unacceptable."

One senior banking source said: "In general, 50 per cent of the bonus is calculated on an individual's performance and the other 50 per cent on the performance of the individual's division. So it is logical overall bonus levels will be down."

Barclays' management, led by John Varley, the chief executive, and Marcus Agius, the chairman, will be first in the harsh glare of the public spotlight on Monday, when it announces its results for 2008.

Barclays, which has a far bigger investment banking operation than Lloyds, is set to make much bigger bonus payments over the next few weeks.