Economy
RBS reports losses of £8.2bn – and employee bonuses of £576m
The Royal Bank of Scotland (RBS), which remains 81% owned by the government, has reported a pre-tax loss of £8.2 billion for 2013. The losses are a result of restructuring costs and misconduct fines.
Despite the losses, RBS’s bonus pool is still £576m – a 15% decrease on the amount paid out last year. David Cameron recently defended the government’s position on bankers’ bonuses at RBS after the Labour party called on the government to act upon EU rules that would cap the bonuses paid.
David Hillman, from the Robin Hood Tax Campaign, commented, “Frankly, this beggars belief. In what other industry would staff at a state-owned company that helped bring the economy to its knees be lavishly rewarded for massive losses?
“This is yet another example of one rule for the City another for the rest of us. It is time we made banks work in our interests rather than the other way around.”
Similar criticisms of RBS were made last year, when full-year figures for 2012 showed losses of £5.17 billion – while the company still shelled out £607m in bonuses for employees.
Following the disappointing figures, RBS announced plans to switch its focus to customers and build trust. The bank aims to be a “smaller, simpler and smarter UK focused bank that puts the needs of its customers at its core”. By 2020, the bank has a target of being the number one bank for customer service and the most trusted bank in the UK.
Andre Spicer, professor of organisational behaviour at Cass Business School in London, said that whilst getting back to “good old banking” was a good idea, in reality it is going to be much harder.
He explained, “Simplifying the firm into three divisions, getting rid of complex businesses, and focusing on consumers should get to the root of past problems. This should please politicians.
“But years of poor performance will make the public who are the majority shareholder nervous. People are likely to start asking whether continuing to loose billons operating a bank is the best use of taxpayers money.”
Meanwhile, the Move Your Money campaign pointed out that many consumers were already moving away from the big five banks to one of the 50 smaller and simpler banks across the UK. Charlotte Webster, campaign director at Move Your Money, said the changes from RBS were “too little, far too late”.
These thoughts were echoed by ethical bank Triodos, who said consumers are now placing more emphasis on ethics and integrity when it come to banks. The bank added that their research showed the top factor influencing Britons’ choice of bank if they were to choose today was that the bank does not pay large bonuses.
Spicer also noted that RBS finds itself trapped by “industry conventions” for paying bonuses to bankers even when the company is losing money. Despite many regulators and researchers agreeing that financial incentives for short-term performance contributed to the financial crisis, the majority of banks continue to pay bonuses simply because their competitors do.
However some banks, such as Handelsbanken, which don’t pay bonuses and came out of the crisis unscathed.
Spicer concluded, “This reminds us that there are alternatives out there, it is just most banks are unwilling to consider them.”
Further reading:
Royal Bank of Scotland to focus in UK customers and economy
Regulators say Euribor reforms ‘must continue’ following rigging scandal
Royal Bank of Scotland faces losses of £8bn
Cameron defends bankers’ bonuses at RBS after Labour criticism