Osborne puts RBS under scrutiny over bonuses

Chancellor George Osborne issued a sharp warning yesterday to the banks against making big bonus payouts.

On the eve of the City bonus season, Mr Osborne said industry had not had “a particularly successful year” which should be reflected in the level of the awards.

Giving evidence to the Commons Treasury Select Committee, he said he would be taking a “keen interest” in the bonuses paid by the part state-owned Royal Bank of Scotland.

“I am clear that – given the fact that this has not been a particularly successful year for banking – you would expect to see bonuses lower this year,” he told the committee.

Mr Osborne said he expected the banks to follow the advice given by the Bank of England to use any surplus cash to build up their capital reserves rather than distribute it in bonus payments.

“That advice should be heeded,” he said. “The Financial Services Authority is currently going bank by bank to see whether they are compliant with that warning.”

He made clear that he would be following the bonus awards made by RBS particularly closely He said the taxpayer was still sitting on large losses as a result of the 2008 bail-out of the bank, adding “I would certainly expect to have many conversations with the RBS management about the bonuses which they may or may not wish to pay. We are many tens of billions of pounds underwater on our investment.”