Forgoing bonuses the right decision for everyone

ONE by one the fat bank bonus cheques are being forgone. The renunciation began last week with John Varley and Bob Diamond at Barclays. This was followed on Sunday by Stephen Hester, chief executive of Royal Bank of Scotland. Now, faced with the pressure of peer example, Eric Daniels, chief executive of Lloyds Banking Group, has said he will renounce his entitlement to a bonus of £2.3 million.

These are the absolutely right decisions. They are right for the banks involved and in particular those, like RBS and Lloyds, which have received massive support from the British taxpayer. The chief executives, directors and senior staff are under an obligation to set an example. Until these banks are back in profit and dividend payments resumed to shareholders, no bonuses should be paid out. And they are right for the wider community, which has helped to rescue the banking system and for whom such bonus payments, on top of generous salaries, would have been deeply divisive when so many are suffering from a severe economic downturn to which the banks were a massive contributor.

But it is galling to note that, far from bankers setting an example at the outset and taking any talk of bonuses off the table at a much earlier stage, they have waited till the eve of results announcements. As such, their declarations are less ones of leadership than of capitulation. That is regrettable, for it is leadership above all that the banks most need to show at this time.