Bankers are getting away with it – all over again!

Jul 1 2009 by Alan Rennie, Editor

JUST when you think that we’ve learned lessons from the excesses of Sir Fred Goodwin and his fat cat pals, up pops another mind-boggling story of a banker’s over-inflated remuneration.

And it involves the Royal Bank of Scotland once again, the same bank which has just thrown thousands of its employees on to the dole queue.

It’s happening just a matter of months after RBS was pulled from the brink of collapse by a massive injection of taxpayers’ money.

The RBS’s new chief executive, Stephen Hester, is on a £1.2 million basic salary which, with other fixed benefits, rises to £1,646,250.

However, it is his “bonus” package, the type of thing that we were all told would be swept away in a reform of remuneration for bankers, that makes your jaw drop.

Hester will earn a total of £9.7 million if he meets a number of admittedly tough targets. We’ll all benefit if he succeeds, say the defenders of the bonus deal.

However, they are missing the point. This is exactly the kind of short-term thinking that got us into the mess in the first place.

Vincent Cable, the Lib-Dem MP who has spoken with more authority than most from the very start of the financial meltdown, thinks that the banks are now feeling it will be “business as usual”.

He thinks the bankers have been let off the hook because the scandals over MPs’ expenses has diverted the public’s attention.

Fifteen months ago, Cable said: “We cannot have a situation where the banks are able to privatise their profits and nationalise their losses.”

I thought that most neatly summed up the unfairness of the situation. But the banks would appear to be getting away with it.

In an article for the New Statesman last week, Cable wrote: “We are now at a crunch point.

“The need to strengthen and update the regulatory regime has collided with the financial institutions’ growing confidence that they can keep the state off their backs.

“Self-serving arguments are being employed, notably that regulation will suppress ‘innovation’. It will. It should. We need more financial ‘innovation’ like a hole in the head.”

Cable argues, however, that Labour’s authority has diminished so much that they can’t face the challenge. And the Tories – “pumped up by City donations” – would have no need or inclination to take it on.

His greatest fear is that, without reform now, financial crises will return “with even greater ferocity” in years to come.