| RBS BONUSES |
| The issue: |
Instead of bickering,sneering and behaving like a bunch of pre-teen children (like I saw on television yesterday) would I not be better to sort out things like "real life" issues like my subject. I found it most embarrising watching "who said what to who" and it gives me the shivers thinking that this country is run by these people..........sad is`nt it. Oh by the way, of course you can publish my unedited notes on your blog.but I bet it wont be.
regards
Peter Lynch |
| Date Issue Raised: |
25 Feb 2010 |
| My response: |
Dear Mr Lynch
Many thanks for the email – which I have put on my website.
Since the beginning of the financial crisis, Britain’s banks have benefitted from taxpayer bail-outs, implicit guarantees, and extraordinary support from the Bank of England. The entire banking system – not just the banks with government stakes – remains dependent for its survival on a vast range of taxpayer support, from inter-bank guarantees to the Bank of England's ongoing liquidity operations. The profits that the banks are making are therefore not simply the results of success, they are subsidised profits.
Conservatives have argued since the start of the recent recession that this is a credit crunch which needs credit solutions to get lending going again to save existing jobs and create new ones. The money that taxpayers have provided to support bank lending must not be diverted into significant cash bonuses. The cash that would have been paid out should be put onto banks’ balance sheets explicitly to support new lending. This should be a condition of continuing to receive taxpayer guarantees and liquidity support.
We don't want to stop reasonable cash bonuses for staff in bank branches, but larger bonuses should be paid in new time-locked equity, to help align the interests of bankers and the banks.
A future Conservative government will empower the Bank of England to use capital requirements to crack down on risky bonus structures. Where an institution’s bonus culture promotes short-term profits at the expense of long-term sustainability it should be required to hold capital to reflect its additional risk. From the banks’ point of view this will discourage risky bonus structures that incentivise employees to seek short-term profits at the expense of longer term stability.
We have also called on the Treasury and the FSA to combine forces to stop retail banks paying out profits in significant cash bonuses, because it is the retail banks which lend directly to business. The cash that would have been paid out should then be put onto banks’ balance sheets explicitly to support new lending. This should be a condition of continuing to receive taxpayer guarantees and liquidity support.
We hope the new international rules on bankers’ bonuses work as that is the best solution. If we find the money that should be going into stronger bank balance sheets is being unreasonably diverted into bigger pay and bonuses, we reserve the right to take further action and that includes using the tax system. We believe in the free market not a free ride
Best wishes, George Young
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Sir George Young Bt MP: Constituency and Parliamentary Website